“Congress has given millionaires and billionaires a free pass: an absolute cap on their Social Security taxes. No matter how high their income, they don’t pay a penny more.” -- Rush Holt
Social Security has been one of the most successful government programs in U.S. history. Today more than 44 million seniors benefit from the program (1), and without it, 21 million of them would be in poverty. (2) In New Jersey alone, it is estimated that 357,000 seniors are kept out of poverty by the program.
After Wall Street blew up the economy, Social Security became even more important. Nearly half of all households have savings significantly below what they need. (3) We should expand this successful program, not cut it. Yet it’s become bipartisan to talk about cutting Social Security – especially since major cuts were proposed by the Simpson-Bowles commission – and that’s wrong. If everyone paid the same rate into Social Security, we’d have more than enough money to make the program solvent and expand it.
A Simple Solution
Most people think everyone pays the same rate on payroll taxes. In fact, the taxes are only collected on the first $113,700 an individual makes. The result is a middle-class worker making $50,000 a year pays the full 6.2% rate while someone making a million pays less than a single percentage point. This has effectively increased the burden on the vast majority of workers while giving the top one percent a pass. (4)
As income inequality has worsened in recent years, a smaller and smaller fraction of overall income has been covered by Social Security taxes. In fact, the amount of income not taxed for Social Security has increased 88% since the 1983 tax reform. (5) Simply returning the fraction of wages subject to the tax back up to the 1983 level (90%) would make Social Security solvent for another generation. The Congressional Budget Office estimates that this step alone would allow the Social Security trust fund to be fully funded through 2082. (6) Covering all income would allow us to actually expand Social Security.
Social Security is a program that everyone participates in and everyone should have to pay the same rate. It’s simply unfair that millionaires pay a rate than average Americans.
Despite the fact lifting the payroll tax cap is such a popular idea, with 68% of Americans supporting elimination of the cap, Congress refuses to take any action.(7) This isn’t rocket science. It isn’t even fifth-grade math. To save Social Security, make the wealthy pay their fair share. End of story.
“Social Security Beneficiary Statistics,” Social Security Administration, 2011 data “Social Security Keeps 21 Million Americans Out of Poverty: A State-by-State Analysis,” Water, Center on Budget and Policy Priorities, 10/16/2012 “Don’t Cut Social Security, Expand It,” Josh Barro, Lead Writer, The Ticker, Bloomberg Politics Blog, March 8th 2013 “Social Security is not going broke,” David Cay Johnston, Pulitzer Prize Winner, Reuters, May 4th 2012 “A Summary of Saving Social Security: A Balanced Approach,” Peter Diamond, Professor of Economics at the Massachusetts Institute, Peter Orszag, Senior Fellow in Economic Studies at The Brookings Institution, 2004 “Social Security Policy Options,” Congressional Budget Office, 2010 “5 Ways To Fix Social Security,” Emily Brandon, US News & World Report, February 18th 2013