Is it Time for Americans who Earn more than $118,500 a Year to Pay more into Social Security?
With more Americans relying on Social Security for their income, some have raised the question whether it is time for the federal government to raise the amount of income that’s taxable to fund the program.
Currently, earnings up to $118,500 are taxed and funneled into the Social Security trust fund. Income above that level isn’t subject to Social Security withholding, putting a disproportionate burden on lower-income earners.
According to the Social Security Administration, in 1983, about 11% of all income escaped being taxed by Social Security. By 2012, that number rose to about 17% of all income.
The Social Security system is presently providing benefits to 58 million Americans, including 41 million retirees and dependents of retirees, 6 million survivors of deceased workers, and 11 million disabled workers and dependents of disabled workers. Right now, the Social Security trust fund has enough extra money to pay full benefits until 2033. At that point, current income will allow it to pay 75% of benefits.
The liberal Center for American Progress argues that policymakers should consider changing Social Security taxation to apply to 90% of earnings in order to put more money into the dwindling trust fund. Such a change, had it been implemented in 1983, would have added $1.1 trillion more into the trust fund by 2013, Rebecca Vallas, Christian E. Weller, Rachel West and Jackie Odum wrote.
“Upward redistribution of income in the United States has meant that income has shifted away from workers whose full earnings are taxed and toward high-income workers whose additional dollars are exempt. At the same time, low-income workers whose wages remain stagnant contribute less in payroll taxes than they would if their wages were rising, while their benefits rise faster than their payroll tax revenue due to the progressive structure of Social Security’s benefits formula,” according to the report.
-Noel Brinkerhoff, Steve Straehley
To Learn More:
The Effect of Rising Inequality on Social Security (by Rebecca Vallas, Christian E. Weller, Rachel West and Jackie Odum, Center for American Progress)
156,000 Seniors Have Social Security Checks Reduced…to Pay Off Student Loans (by Noel Brinkerhoff and Steve Straehley, AllGov)
Raise Social Security to 70? What about Workers with Physical Jobs? (by Noel Brinkerhoff, AllGov)
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