Ninety-four percent of us pay into Social Security from every paycheck we receive. A few of us stop paying into Social Security in the first few working hours of the year.

The “Tax Freedom Day” Scam

Every year you hear a lot about Tax Freedom Day. This is the day the public supposedly has “earned enough money to pay its total tax bill for the year.”

According to the Tax Freedom Day website: “Americans will collectively spend more on taxes in 2016 than they will on food, clothing, and housing combined.”

The trick, of course, is the word “collectively.” As in “Bill Gates walks into a room full of homeless people. Collectively the room owns billions of dollars of wealth.” Non-billionaire Americans don’t pay nearly this much in taxes.

Tax Freedom Day is an anti-government propaganda gimmick where the billionaire class suggests that we stop “working for the government.” It’s a trick: most of us don’t pay that much in taxes and those who do are making so much money they hardly notice it.

Let’s see how this “Tax Freedom Day” formula can be applied to framing America’s retirement crisis.

“Social Security Freedom Day”

Almost all of us pay the 6.2 percent Social Security “payroll tax” on every dollar that we earn. Employers pay an additional 6.2 percent. If you are self-employed you pay the entire 12.4 percent. These taxes are paid until we reach a “cap” of $127,200 in a year so the maximum anyone pays is $7,886 (twice that if you are scam-classified as a “contractor.”) Ninety-four percent of us never reach that point.

Again, you pay 6.2 percent of your earnings, 12.4 percent if you are self-employed, until you make $127,200. So there is no “Social Security Freedom Day” — the day we stop paying this tax — if we are regular people who make less than $127,200.

Put another way, if you make more than $127,200 you reach a “Social Security Freedom Day” and stop paying this tax. You only pay $7,886 no matter how much more you make. The more you make the sooner your “Social Security Freedom Day” arrives.

“Social Security Freedom Day” never arrives for most of us. But how early does “Social Security Freedom Day” arrive for some of us? According to a post by Teresa Ghilarducci, an Economics professor at The New School for Social Research titled, Who Is Finished Paying Their 2017 Social Security Taxes? Probably Not You.,

For those at the upper end of the income distribution (the top 1 percent, or the 2 million people earning more than $250,000 per year and the 137,000 people earning more than $1 million per year), $127,200 is a trivial amount on which to pay Social Security tax.

Take, for example, the top 9,600 or so wage earners who earned over $10 million per year (2015 is the latest data available). New Year’s Day 2017 fell on a Sunday. By the time they finish their two weeks back at work, they will be done paying Social Security taxes for the entire year.

That is nothing. The 202 Americans who earned more than $50 million a year finished paying less than 5 hours after the ball dropped in Times Square. Another 773 people earning between $20-$50 million a year will finish paying the tax before you finish reading this blog on January 2nd.

“Social Security Freedom Day” arrived very early for those top 773. How early? Ghilarducci writes, “We can have fun with the calculations: who will finish paying by their first coffee break of the day? After brushing their teeth? After their hangover?”

The rest of us pay in all year, a 6.2 percent tax that the wealthy don’t pay. That’s 12.4% if you are a “contractor.” Straight off the top of your income.

The Retirement Crisis

America’s experiment in shifting retirement obligations away from employers and onto working people through IRAs and 401Ks has clearly failed. Most Americans do not have enough savings, pension and expected Social Security benefits to be able to get by when they retire — if they even can. One-third have nothing saved up. The median working-age couple has saved only $5000 and seventy percent of couples have less than $50,000 saved.

Even people who have earned pensions are seeing them being cut because corporations skimped on funding the plans.

This leaves far too many people dependent on Social Security. The average monthly retirement income from Social Security was $1,341, or $6,092 per year, and only $2,212 for couples, or $26,544 per year.

This is not enough for people to get by. But a few of us — the very same few who stop paying into Social Security so early in the year — are retiring in luxury.

The Retirement Divide

Not everyone is facing a retirement crisis. Not at all. There is a stark divide between most of us and a few of us when it comes to retirement. Those same few who get a nice, early “Social Security Freedom Day” and no longer pay into Social Security are the very people who do not face a retirement crisis.

Exxon CEO Rex Tillerson, for example, is retiring to join the Trump/Putin administration. He is receiving a $180 million retirement package including include a pension valued at $69 million.

How wide is this divide? A December, 2016 Institute for Policy Studies report titled, A Tale of Two Retirements, shows there is a huge retirement security divide between those at the top of corporate America and nearly all the rest of us.

From a summary of the report:

Just 100 CEOs have company retirement funds worth $4.7 billion — a sum equal to the entire retirement savings of the 41 percent of U.S. families with the smallest nest eggs.

This $4.7 billion total is also equal to the entire retirement savings of the bottom:

59 percent of African-American families
75 percent of Latino families
55 percent of female-headed households
44 percent of white working class households

Need To Increase Social Security

Obviously the first obligation of a government should be to its people. With the failure of “market solutions” that shifted responsibility for retirement from corporate pension plans to to IRAs ad 410ks something needs to be done. This shift boosted corporate profits, providing huge sums for payouts to executives and shareholders — again, the very same people who get their own “Social Security Freedom Day”. But it has impoverished huge percentages of resent and future retirees.

How do we pay for expanding Social Security? That’s simple. Social Security needs to get the money from where the money went. The well-to-do don’t need a “Social Security Freedom Day” because they are already well-to-do. Eliminate this “cap” and have everyone pay into the system so everyone can retire with some dignity. And what about a requirement for corporations to contribute to employee retirement pension funds?

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This post originally appeared at Campaign for America’s Future (CAF) at their OurFuture site. I am a Fellow with CAF, a project of People’s Action. Sign up here for the OurFuture daily summary and/or for People’s Action’s Progressive Breakfast.

Go to ExpandSocialSecurity.com

Corporations have largely eliminated pensions. Wall Street has been pushing the campaign to eliminate public-employee pensions. The 401K scam means that most of us have little or no savings for retirement, and Social Security is meager.

We need to EXPAND Social Security. INCREASE benefits so people have live on it. Lower the age to 55, opening up millions of jobs.

Were does the money come from?

It comes from our priorities.

Where did the money come from for the Iraq war? The Wall Street bailouts? Where does the money come from for the hiige military budget? The oil company subsidies? And mostly the huge tax cuts for corporations and the wealthy?

A number of the DC elites are talking about changing the way Social Security checks are adjusted for inflation. This is a great idea, as long as any such adjustment measures the things the elderly actually spend money on. Let’s do it! Let’s change the way we adjust Social Security for inflation because inflation hits older people much harder.

Washington’s elites are all Very Seriously concerned that even though Social Security currently has a huge trust fund, the program might “go broke” many, many years in the future. (Never mind what this says about our country’s priorities — do we ever hear that the military budget will “go broke?”) This discussion of Social Security is for some reason so important to these Very Serious People that it overrides discussion of the climate emergency, the national jobs emergency, the crumbling infrastructure, and almost every other national problem except that our wealthy and corporations are taxed far too much. (Please click the links in this paragraph.)

Continue reading →

We JUST had an election where the public (not to mention Every. Single. Poll.) overwhelmingly said no cuts to Social Security or Medicare, and raise taxes on income over $250K. That ought to mean something. But the “word” out of DC is that a deal is underway that cuts the Social Security COLA and increases the income level subject to a higher tax from $250K to $400K.

Senators and Representatives who are thinking of touching the “third rail:” How many constituents are calling your office today to say, “Yes, I want you to cut the Social Security COLA”?

Readers: Have YOU called YOUR senators and representative yet to let them know how you feel?

Also: Click here to tell the President: No Deal That Cuts Benefits.

Political Suicide

Cutting Social Security makes no sense, and is bad politics because it hurts people. Old people depend on this meager benefit and by law Social Security can not contribute to deficits. But never mind the numbers, look at the social and political effects of a deal that cuts the Social Security cost-of-living-adjustment (COLA) immediately after the public voted not to do this.

The social effect: Does our society care about people, or just about money? Cuts in Medicare, Medicaid and Social Security hurt PEOPLE. Raising tax rates on the wealthy is just money. What does it tell the public about our society if their government cuts Social Security benefits immediately after we have an election in which the public overwhelmingly votes against cuts in Social Security or Medicare, and to increase taxes on $250K and up? This reported deal raises that $250K to $400K, reduces military cuts, and ignores that the same amount of money could be raised in ways that actually help the country and economy, like a Financial Transaction Tax.

Bankers got huge bonuses with government bailout money, and now you are cutting the meager benefits old people get? What does this tell the public, to cut this when one after another Democratic leader, including Vice President Biden, has stepped up to insist that Social Security is off the table? It tells the public not to trust their leaders, because the big money will win every time.

Talk about undermining “certainty” and “confidence.” Wow.

The political effect: Suicide. Seniors pay attention to the yearly COLA increase. Every single year from now on when the COLA is announced it is more than likely that seniors will believe they are getting a lower increase because President Obama and the Democrats betrayed them. This is human nature, they will think they would have gotten more (and Republicans will tell them they would have gotten more).

It will become folklore — conventional wisdom — that they would have received a much higher increase, except Obama and the Dems betrayed seniors.

Alternatives

Need to raise some money? Here are a few things you can offer instead of cutting the Social Security COLA:

• Financial Transaction Tax on speculative investments – a quarter of a penny per share.
• A BIG surtax on incomes over $10 million until the debt is paid off.
• Cut the military budget a lot more. Reagan doubled it and ‘W’ Bush doubled it again. The Soviet Union is gone.
• Get rid of oil company subsidies.
• Rebuild the nation’s infrastructure (with American-made materials) thereby employing millions who will then be paying taxes and won’t be getting assistance, and then our economy will be more efficient and competitive in the future.
• Retrofit (with American-made materials) our buildings and homes to be energy efficient, thereby employing millions (etc) plus our economy will have to spend less on energy from now on.
• Make companies bring home the money they are holding offshore, and pay the corporate tax on it.
• A thousand other ways to cut the deficit without hitting old people with the bill.

Now Please Read Richard Eskow’s Post

It seems like everything I try to say Richard Eskow succeeds in saying, and does so better than I ever could. (Seriously, read what he wrote about the CT shootings.)

Richard explains why this COLA-cut offer is a bad idea, in This Is Not America’s Deal,

This deal would make voters very unhappy. It reflects neither their wishes, their needs, or their values. They’ve already said so – to pollsters like ours and in the voting booth on Election Day. Instead of responding, this looks like another “insider deal” – another agreement that suggests the public’s values and concerns vanish once you cross the Beltway.

… The Republicans lost the last election – by a landslide, in fact, in both the Presidential and Senate races. They even lost the House — by more than 1.6 million votes. Only their gerrymandering, vote suppression, and billionaire campaign cash allowed them to retain control of that body despite a popular-vote defeat.
And only their outrageous abuse of Senate rules like the filibuster has allowed them to tie up that body and prevent it from doing its work.

Republicans lost because their ideas are unpopular. But this deal would turn those ideas into policy. This undemocratic ”Loser Take All” strategy will further alienate voters, while encouraging extremists in Congress to keep abusing the system.

… This deal would send the wrong message: that successful programs and policies – Social Security, Medicare, and progressive taxation – are problems to be fixed, not solutions to be implemented and strengthened. These programs reflect our finest values: fairness, self-sufficiency, and mutual support. And they work.

A deal like this would also distract the nation from the real sources of our economic difficulties – like wealth inequity, a shortage of good middle-class jobs, and the misdeeds of under-regulated banks and corporations.
No deal is acceptable that undermines our social contract — our common agreement to work together and help each other — as this one would. They’ve made us strong and prosperous and they must be protected.

PS If you really want to change the COLA formula, use a measurement that looks at the things old people actually spend their money on, like the cost of prescriptions or dental care. “Chained-CPI” doesn’t look at these things, so it would lower the COLA. An honest look at how the cost of living changes for old people would mean a higher COLA than now, not a lower one.

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This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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“If you are 54 or 55 you might want to listen now.”
Seriously, what did you think “There will be no changes in Medicare for Social Security for current retirees” actually means?