Politics

More misleading information about Social Security

Misleading information about Social Security abounds.  Much of it is caused by political rhetoric that seeks to create the myth that there are easy solutions to every problem if only we raise taxes on somebody else … whomever the politician decides to label wealthy.

Read the letter to the editor below. 

Raising the ceiling on taxable wages DOES NOT provide long-term solvency‼️ That is simply a fact. Taxing all earnings would fill only 41% of So­cial Se­cu­ri­ty’s long-term deficit. 

Why should a person earning $100,000 pay taxes on 100% of income while the person earning $300,000 pay taxes on 40%? Well perhaps it’s because the person earning $100,000 has his Social Security benefit calculated on $100,000 while the person earning $300,000 has her benefit calculated on $118,500 (or whatever the maximum wage base is).  It should also be noted that the person earning $300,000 pays a higher Medicare tax on all earnings plus a tax on investments and pays double or more the Part B premium in retirement  while, of course receiving the same benefits. SEE NOTE BELOW

In addition, the formula for Social Security benefits skews a higher benefit toward lower-income beneficiaries. The following chart is based on the Social Security Quick Calculator and the previous earnings pattern the calculator assumes. The Social Security benefit for the person earning $300,000 is higher not because they earn $300,000, but because it is assumed they earned the maximum taxable wage for many years. As you can see, higher income earners are responsible for generating a higher percentage of their own retirement income and rightly so.


Social Security was never intended to be a welfare system for the elderly, but current political rhetoric is convincing more and more people they are entitled to whatever they can glean from others. Why is raising the taxable wage, but not the wages used to calculate a benefit, fair? Fair to whom?

Politicians heeding the decades of warnings from the Social Security Trustees and others and gradually adjusting taxes and benefits to a sustainable level would have been fair‼️

Instead these politicians have spent years lying about and ignoring the state of Social Security in fear of the AARP and voting seniors. They have succeeding in convincing Americans that what is a “logical fix” making “perfect sense” is higher taxes on a few Americans and turning Social Security into another welfare program. 21st century Americans have a sense of fairness that turns them into dependents of government. 

Why don’t concerned Americans throw every pandering politician out of office?

To the Editor:

Finally, thank you very much for putting the most fair and logical “fix” for Social Security into print (“Social Security in an Election Year,” editorial, Jan. 3).

Raising the ceiling on wages subject to Social Security deductions is long overdue. The current ceiling is just $118,500. Raising it, say, to $250,000 or $300,000 a year would provide long-term solvency.

Why should a person earning $100,000 a year have 100 percent of his wages subject to Social Security deductions, while a person earning $300,000 has just 40 percent of his wages subject to the deduction? It makes no sense whatsoever, and applying the deduction to a higher wage ceiling would not be an onerous burden on the higher wage earner.

Rather than make people work until they are 70 or reduce Social Security benefits or privatize the system, raising the wage ceiling makes perfect sense.

JAY THOMAS WATSON
Sonoma, Calif.

Source: New York Times 12-7-16

NOTE:  There are two ways the Medicare taxes affect upper-income people. First, a 3.8% Medicare surtax is levied on the lesser of net investment income or the excess of modified adjusted gross income (MAGI) above $200,000 for individuals, $250,000 for couples filing jointly, and $125,000 for spouses filing separately.Second, wages above $200,000 (individuals), $250,000 (joint filers), and $125,000 (spouses filing separately) will be subject to higher payroll taxes. Let’s review each provision in detail.

Medicare payroll tax on earned income

The Medicare payroll tax is 2.9%. It applies only to earned income, which is wages you are paid by an employer, plus tips. You’re responsible for 1.45% of the tax, and it’s deducted automatically from your paycheck. Your employer pays the other 1.45%.

High-wage earners will owe an additional 0.9% on earned income above the thresholds mentioned above. So, for example, if you are an individual filer whose income is $225,000, you will pay a 1.45% Medicare tax on the first $200,000, then 2.35% (1.45% plus 0.9%) on the next $25,000. Your employer is required to withhold the extra 0.9% once your wages pass the $200,000 threshold for individuals.

Source: Fidelity.com

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4 replies »

  1. I am so tired of the rich bitching about Social security. The guy making $300,000 still gets double what the guy making $50,000, with the income cap he only paid about double the tax and he made six times what the average worker made.
    20 years in the USAF 1975 to 1995 I made just $310,000. How much money do the rich need? I am for fair taxes, even at 50% the guy making $300,000 is still better off than the guy making $50,000 or less.

    So, after 20 years of SS benefits the guy making $50,000 will get $343,200 plus COLAs. The guy making $300,000 will get $693,841 plus COLAs. The guy getting the bigger check will also get bigger COLA increases. Also, the higher earner had more income through out their working life to save and invest, than the guy making $50,000 or less.

    The truth is the reason most of the rich are against lifting the cap is the additional tax the employer will have to pay, not the individual. Big companies like WM GE Exxon and even the Federal government do not want to have to pay the additional tax.

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    • Sounds like you are falling into the Bernie Sanders trap. What one has done or accomplished in their lives, what sacrifices they may have made is irrelevant, but rather we just look at where they end up and decide we are entitled to more of their money.

      Higher income people are not lottery winners taking from others. In the vast majority of cases they earned what they have. They made life decisions different from others. How in any concept is that unfair, especially when along the way they contribute much more in all forms of taxes than more average people?

      You see it as appropriate to turn Social Security into welfare?

      Actually anyone earning a steady $118,000 will receive nearly twice the one earning $50,000. Do you put the person earning say a $120,000 in the same class as the one earning $300,000?

      What about the income taxes paid by the person earning $300,000; versus those earning $50,000? (Not to mention the greater SS).

      Income taxes and other special taxes on higher income citizens also support Medicare and Social Security. When I retired part of my pension does not come from my employers pension plan so it was considered deferred compensation. I paid $18,000 in Medicare taxes at the time of retirement even though I may never receive the pensions calculated value.

      I don’t think the rich are complaining about Social Security or the cap, what seems counter to the design and purpose of Social Security is raising the wage cap, but not the wage used to calculate the SS benefit.

      I think the replacement percentage is far more relevant especially since the formula is skewed toward lower income workers which is fine.

      I have suggested that in the future the COLA not be applied to anyone who retires with the maximum Social Security benefit or at least it not be applied for the first five years of retirement on the basis they had resources to accumulate other funds.

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      • I am not falling into any trap. If you make more you pay more in taxes, period. The SS system was started so no one in retirement would live in poverty. We have to fix the system, if that means raising the cap, which I think it does, tough.
        SS has always been a social welfare program that is the way it was set up and continues to this day, no matter what anyone says. One way to make up for the additional tax, without increasing the benefit is exempt the high earner from income tax on the SS benefit. I do not think anyone should have to pay more than 50% income tax on taxable income and investment income should be taxed at 10%, if we want people to risk capital. So, I am not for BS take it all tax system.

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      • Social Security was set up to be self-sustaining pay as you go, but politicians changed all that with unpaid for improvements over the years. Who said you don’t pay more if you make more? Clearly if you earn $40,000 you pay far less in all taxes, including Social Security than the person making $300,000.

        How is Social Security unfair if everyone up to the wage cap pays the same percentage of their income and all benefits are calculated only on wages to the wage cap? In that kind of a self-sustaining system income above the wage cap is irrelevant.

        If a person earns no more than $50,000 a year their entire life, how much income replacement should they have from a public program?

        If the contribution levels had been adjusted as they should have been as changes were made to the system and if COLAs were paid for and funded as granted, we wouldn’t be in this mess. Now politicians ignoring their own indifference and cowardliness on the subject simply look for a populist solution … tax the wealthier Americans. Heck, Sanders wants to use the same process of lifting the cap to improve the benefits, not save the system.

        How many times can you count the same money?

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