In the year 2000 in the class Sociology of Population Issues, I learned how my generation would not be getting social security unless something has changed. 20 + years later nothing has changed and social security will be running out in 10+ years.
Although the boomer generation has leveraged our future by living outside of their means and leaving us with their debt the real reason Social Security is in danger is not because too many boomers are retiring like my parents. Let’s dive in!
Social Security is in danger because of inequality
Social Security is still helping the olds enjoy their golden years, but not for long. Social Security is one of the most popular and successful government programs ever created, not only helping retirees, but it’s also keeping 26 million people out of poverty.
Yet here’s the problem. It’s going to run out of money before you can ever receive it if the rich don’t start paying their fair share. The trustees of Social Security say the program will only be able to pay full benefits until 2033.
After that, Social Security will only be able to dole out roughly 77% of benefits. Why? It’s not the reason that many seem to think. And we are going to have more and more baby boomers who are going to be collecting Social Security.
The Social Security trustees anticipated the boom in boomer retirements. This is why Social Security was amended back in 1983 to gradually increase the age for collecting full retirement benefits from age 65 to age 67. That change is helping finance the boomers retirement.
What did the Social Security trustees fail to anticipate?
A much larger chunk of the nation’s total income is now going to the top compared to decades ago. But income subject to the Social Security payroll tax is capped. No dollar of earnings above the cap is taxed the cap. In 2023, the tax cap stands at $160,200, which means any income above that amount is exempt from the payroll tax. As a result, middle-and lower-income workers bear a much greater tax burden in funding Social Security than the 6% of Americans who earn above the threshold, according to a new analysis from the left-leaning Center for Economic and Policy Research. So as the rich have become far richer, more and more of the nation’s total income has escaped the Social Security payroll tax.
For example, a CEO earning $20 million a year pays Social Security taxes on roughly 1% of their income, while a worker earning under the cap pays Social Security taxes on 100% of their income. As more of the nation’s income has gone to the super-rich, logically, a larger share of the nation’s income goes untaxed for Social Security.
It’s time to scrap the cap
This is why widening inequality has cost the Social Security trust fund an estimated $1.4 trillion since 1983. The solution is obvious. It’s time to scrap the cap and make the rich pay more in Social Security taxes. One plan introduced in Congress would eliminate the cap on earnings over two.
Hundred and $50,000 and also subject investment income to Social Security taxes. It’s estimated that this would extend the solvency of Social Security for the next 75 years without raising taxes on 93% of American households. This is where you come in.
If we want to ensure Social Security’s long-term future and that working people can retire with dignity, we must make the wealthy pay their fair share.
More news and info on Social Security Solutions:
- One way to fix Social Security? “Smash the cap”
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Make this the last year that millionaires stop paying into Social Security before the rest of us
- Here’s How to Save Social Security—if Democrats Have the Stones to Do It
The Heritage Foundation and Republicans are against eliminating the Social Security Tax Gap
What is their reasoning?
Removing the Social Security taxable wage cap would reduce job creation and economic growth while substantially increasing payroll taxes on American workers. A slowdown in the growth of compensation and a significant decrease in the savings rate would further squeeze family budgets.
What is the Heritage Foundation?
Heritage is a tax-exempt 501(c)(3) organization as well as a BBB Wise Giving Alliance accredited charity funded by donations from private individuals, corporations and charitable foundations. As a 501(c)(3), Heritage is not required to disclose its donors and donations to the foundation are tax-deductible.
ProPublica reported that Heritage Action, the 501c4 arm of the Heritage Foundation, received $500,000 from the Freedom Partners, a consortium of donors founded by Koch Industries executives, in the 2012 U.S. presidential election. This “outside spending”
The Heritage Foundation has also: misinterpreted the impacts of global warming on the US economy; twisted news reports to justify claims about ‘climate taxes’; issued deceptive economic analyses and presentations; and released allegations about economic ruin and job losses from green stimulus investments by Congress. Entities like the Heritage Foundation are why the United States is diving deeper into inequality.