Most people pay a Social Security tax of 6.2 percent on their income throughout the year, on every dollar they earn. But the top 1 percent of working Americans are only taxed during the first six weeks of the year, on a small portion of what they earn. They pay the Social Security tax only on the first $118,500 of income, the amount at which Social Security payments are capped.
That means from this week forward, they are enjoying a payroll tax holiday that lasts through the rest of the year. Is that fair?
Today the Social Security trust fund has about $2.8 trillion. But, by 2033, if nothing is done to increase the amount of money in the trust fund, it will have spent down its assets and will only be able to pay about 75 percent of scheduled benefits. As it is, U.S. benefits are already stingy as compared with those of other wealthy countries.
According to the Center for Economic Policy and Research (CEPR), one driver of this future shortfall in the Social Security trust fund is the dramatic widening of income gaps in the last three decades. The people earning the highest incomes have seen faster wage increases than other workers. Consequently, more income is escaping tax than originally projected, and the Social Security trust fund has collected less revenue than needed.
The Center for American Progress reports that in 2013 almost 13 percent of total wage income went to the top 1 percent of wage earners, almost as much as went to the entire bottom half of wage earners. Consequently, more income is escaping tax than originally projected, and the Social Security trust fund has collected less revenue than needed.
A simple solution for building up the Social Security trust fund to what we need down the line is to raise the cap to the level originally intended by Congress and President Reagan in 1983, when the current payroll tax formula was set. By so doing, 70-80 percent of the projected trust fund shortfall would vanish.
Based on Census data, CEPR projects that only one in 15 workers would be affected if the Social Security cap were lifted. Only one in 32 women would pay more, and only one in 43 Latinos would pay more.
Lifting the cap is not only fair, it would eliminate the need for benefit cuts or tax increases on the middle class. And a large majority of Americans support it. Isn’t that the right way to shore up Social Security?
Help us Prepare for Trump’s Day One
Trump is busy getting ready for Day One of his presidency – but so is Truthout.
Trump has made it no secret that he is planning a demolition-style attack on both specific communities and democracy as a whole, beginning on his first day in office. With over 25 executive orders and directives queued up for January 20, he’s promised to “launch the largest deportation program in American history,” roll back anti-discrimination protections for transgender students, and implement a “drill, drill, drill” approach to ramp up oil and gas extraction.
Organizations like Truthout are also being threatened by legislation like HR 9495, the “nonprofit killer bill” that would allow the Treasury Secretary to declare any nonprofit a “terrorist-supporting organization” and strip its tax-exempt status without due process. Progressive media like Truthout that has courageously focused on reporting on Israel’s genocide in Gaza are in the bill’s crosshairs.
As journalists, we have a responsibility to look at hard realities and communicate them to you. We hope that you, like us, can use this information to prepare for what’s to come.
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In addition to covering the widespread onslaught of draconian policy, we’re shoring up our resources for what might come next for progressive media: bad-faith lawsuits from far-right ghouls, legislation that seeks to strip us of our ability to receive tax-deductible donations, and further throttling of our reach on social media platforms owned by Trump’s sycophants.
We’re preparing right now for Trump’s Day One: building a brave coalition of movement media; reaching out to the activists, academics, and thinkers we trust to shine a light on the inner workings of authoritarianism; and planning to use journalism as a tool to equip movements to protect the people, lands, and principles most vulnerable to Trump’s destruction.
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