For more than 80 years, Social Security has been funded by hardworking Americans through the payroll tax in exchange for guaranteed benefits upon retirement, disability or death. As such, it is a budget-neutral program that doesn’t contribute a penny to the deficit. Social Security is broadly supported by Americans because it is an earned right. The relationship between earnings and benefits is a fundamental feature of the program, one that would be completely undermined if it were no longer funded by a payroll tax.
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This Valentine’s Day marks the date when Americans with wages exceeding $1 million stop paying into Social Security for the year. That’s because anyone earning at least that much hits the Social Security payroll tax cap of $128,400, barely seven weeks into 2018. In stark contrast, the average American worker contributes payroll taxes throughout the year.
“This red letter day takes on added significance because of the need to address the long-term solvency of Social Security and a political climate where seniors’ earned benefits are under constant threat,” says Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare.
The payroll tax cap prevents billions of additional dollars from flowing into the Social Security Trust fund, which is projected to be able to pay about 80% of benefits beginning in 2034 if Congress takes no action. While some on the political right have advocated cutting benefits and raising the retirement age to address the shortfall, the National Committee believes that benefits should be boosted and the program’s solvency strengthened by lifting the payroll tax cap – so that millionaires pay their fair share.
Read more from our Press Release by clicking here.
Their analysis lends credibility to the best and fairest proposed fiscal change for Social Security: eliminate the cap on wage income subject to the payroll tax, which this year is set at $118,500. Wages over that level are assessed no payroll tax at all.
Michael Hiltzik via Los Angeles Times.
Related Reading:
America’s Richest 1% Won’t Contribute Another Dime to Social Security All Year.
Of all the trial balloons that have been floated in Washington this spring, one in particular needs to be shot down before it gains altitude: eliminating the Social Security payroll tax and instead funding the program with general revenues. It is not clear how seriously this idea is being considered. But it is a terrible proposal that would end Social Security as we know it, which would hurt the 3 million Florida retirees who count on their benefits for a modicum of financial security.
via Palm Beach Post.
More on this issue can be found here.
The payroll tax cap prevents billions of additional dollars from flowing into the Social Security Trust fund, which is projected to be able to pay about 80% of benefits beginning in 2034 if Congress takes no action.
On February 11th, the top 1% of American workers pay their last Social Security payroll tax for the entire year. Meanwhile the rest of America keeps working and contributing to keep Social Security strong. Most Americans don’t even know the $118,500 Social Security payroll tax cap exists because they never earn enough money to hit it. It’s not fair and it’s not right. Now’s the time to tell Congress to lift the Social Security payroll tax cap.
Media reports have been circulating in Washington for the last few weeks that the Trump Administration is considering a proposal to eliminate the payroll tax. Since this tax is used exclusively to fund Social Security and Medicare, its elimination would be tantamount either to ending these two vitally important programs or converting them into welfare programs where retirees’ benefits would be subject to the whims of Congress and the vagaries of the legislative process.
The National Committee to Preserve Social Security and Medicare opposes this terrible idea, and urges the Trump Administration to disavow what we hope is an ill-conceived trial balloon.
More on this issue via Entitled to Know.
Max Ritchman, President and CEO of the National Committee to Preserve Social Security and Medicare: “America’s seniors understand all too well that our nation faces a retirement crisis and improving Social Security benefits is vital to keeping millions from poverty. Rep. Linda Sanchez’s ‘Strengthening Social Security Act’ makes several important improvements for seniors by: phasing out the payroll tax cap so that the wealthy pay their fair share, creating a Cost of Living adjustment for the elderly and boosting benefits for all retirees including widows/widowers. NCPSSM strongly supports this legislation and applauds Congresswoman Sanchez for doing the right thing for America’s seniors and their families.”
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4. Trump is considering getting rid of the payroll tax, which would destabilize Social Security. The payroll tax is a dedicated funding stream for the Social Security trustfund, which working people pay into with the promise that they will receive Social Security benefits after they retire or Social Security Disability Insurance benefits if they are unable to work due to a disability. Social Security is especially important for women, who have lower retirement savings on average and tend to live longer than men. But without a dedicated funding stream, Social Security would have to rely on appropriations to the program or deficit spending to pay out benefits that recipients have earned after a lifetime of work. This destabilizes Social Security and subjects it to the political whims of Congress.
via NWLC.
Related Reading:
- Repealing the Social Security Payroll Tax: A Terrible Idea.
- Since this tax is used exclusively to fund Social Security and Medicare, its elimination would be tantamount either to ending these two vitally important programs or converting them into welfare programs where retirees’ benefits would be subject to the whims of Congress and the vagaries of the legislative process.
The definitive Democratic counter proposal in the fledgling fight over Social Security is starting to emerge, and it has a familiar ring in the era of income inequality politics: tax the rich.
via Talking Points Memo.
Related Reading:
America’s Richest 1% Won’t Contribute Another Dime to Social Security All Year.
Investment in home and community-based care is popular and must be included in #infrastructure. Now it’s up to Congress to get it done. https://www.nytimes.com/2021/06/04/opinion/elder-care-congress.html #HCBS @nytimes