There is a growing volume of rhetoric from the left shouting one theme; “if we just ask the wealthy among us to pay their fair share we can not only assure the solvency of Social Security, but expand it as well.” Their idea (initially anyway) is to continue the Social Security tax on all earnings above the current cap or all earnings above $250,000.
The argument includes the convoluted logic that because a person pays tax on $127,200 (2017) while earning much more, lower income workers pay a higher payroll tax rate than those who earn more. Of course they ignore the inconvenient fact that the Social Security benefit is ultimately based only on wages up to the wage cap.
What they are saying is that regardless of what you pay in Social Security taxes, if they determine you don’t need the benefit, it will be given to others. Think about that, you could just as easily say if you diligently saved and invested for retirement all your life and have a million dollars in your 401k, you don’t need Social Security so we are going to means test the benefit when you are age 66 regardless of what you paid for in taxes.
There is another problem with the remove the cap argument; doing so does not insure long-term solvency for Social Security and certainly does not provide extra money to expand benefits. Even if the 75-year solvency was achieved the program would still not be sustainable. Those facts, based on the Social Security actuary’s findings and the Trustee’s report, apparently don’t matter to people pushing their agenda, an agenda easily accepted by poorly informed Americans eagerly willing to accept free stuff or anything paid for by the “wealthy among us.”
NOTE: I am proud to announce that the truth really does hurt. For several weeks now I have been following an organization on Facebook called “SocialSecurityWorks.” I commented extensively and replied to other comments pointing out facts about Social and refuting some of the misinformation presented. Now I have been blocked from commenting, replying to comments or even replying directly to another commenter. That should tell you something about the credibility of people with an agenda that leaves no room for debate, facts or disagreement. Quite sad really, but indicative of our times.
By the way, as you can see below, the no cap crowd want 6% (or 1.5%) of working Americans to carry the burden of saving and expanding Social Security. Even FDR must be spinning in his grave.
On January 1st, the maximum amount of annual earnings subject to the Social Security tax – a.k.a. the payroll tax cap – increased to $118,500. Every year, this cap is adjusted to keep up with inflation. However, many American workers are not aware that any wages above the cap are not taxed by Social Security.
That means that people who make twice the cap – $237,000 per year – pay the Social Security tax on only half of their earnings, so they no longer pay it after July 1st. And those who are fortunate enough to make over $1.2 million dollars annually are finished paying their Social Security taxes for the year by February 6th. In other words, workers who earn $118,500 or less per year pay a higher Social Security payroll tax rate than those who make more.
Source: Center for Economic and Policy Research (including tables)
Categories: Social Security