Fixing Social Security
This letter in the Washington Post today points out that raising the cap on earnings that are subject to Social Security taxes would cover any anticipated shortfall. We keep hearing that Social Security is “in crisis” and might not be able to pay our retirement benefits, when raising this cap would fix everything.
That sounds complicated, but it is significant, so let’s look at what it means. Everyone who gets a paycheck pays a Social Security tax. This is the largest tax that most Americans pay. But most people don’t know that you don’t even pay this tax on money you make after you make $85,000. And you only pay it on money you earn by working. You don’t pay it on income from an inheritance, or from stock gains, or the other ways that the very rich get their money. Only on money you get in a paycheck from working.
Got that? If you make MORE than $85,000 you stop paying this tax. If you inherit or make your money from stocks or real estate or other ways money is made if you already have a lot of money you don’t pay this tax. Only working people pay this tax. The largest tax that average working Americans pay, and it isn’t even paid on working incomes above $85,000.
But it gets worse. Keep reading.
Where does this Social Security tax money go? We’re told that Social Security is a “ponzi scheme” and people paying in now are paying the retirement of people who are retired now. But actually much more is being paid in than is being paid out. This surplus, (the largest amount taken from most of our paychecks and which is not paid when you make more than $85,000), is loaned to the government, used to pay for general budget items, and the government owes that money to the Social Security fund. The government is borrowing this because huge tax cuts for the rich, starting under Reagan and continuing under Bush, leave the government without enough money to pay its bills.
Got that? The largest tax paid by average working people goes back out to cover tax CUTS for the rich.
But it gets even worse. Keep reading.
When we get to the point where there is no more Social Security surplus Social Security will need to start collecting the money that the government borrowed. It has to collect this in order to meet its payments to retired people. If the government can’t pay back these loans, retired people won’t get their Social Security checks.
Where will the government get this money? The only way the government is meeting its obligations NOW is by borrowing money FROM Social Security. What happens when Social Security needs to start getting money BACK instead? The money that is supposed to be there will have been spent on tax cuts for the rich. But who depends on this Social Security money? The very working people who are getting soaked now to cover these tax cuts for the rich.
So if we raise the cap on income that is taxed for Social Security, making high-income working people pay THE SAME amount as people who make less, it covers any anticipated Social Security shortfall. Yet if this money just goes back out as tax cuts for the rich we still won’t get our Social Security when we retire.
But wait, I have to throw this in.
Last year the government paid out $359 billion for debt interest. That’s money paid to cover the interest on the “Reagan debt,” which accumulated because of tax cuts for the rich. This is the largest item in our budget. We pay tax money, and $359 billion of it is paid out to people who had the means to loan trillions to the government. (Guess who.)
I’m just trotting out some of that there (forbidden) populism to see how it sounds.