A popular idea to “save” Social Security is just raise the taxable wage cap. This is based on the convoluted thinking of progressives. Higher income earners pay a much lower percentage of total income into Social Security. Yup and they pay a much higher percentage of income taxes too.
In 2023, the tax cap stands at $160,200, which means any income above that amount is exempt from the payroll tax. As a result, middle- and lower-income workers bear a much greater tax burden in funding Social Security than the 6% of Americans who earn above the threshold, according a new analysis from the left-leaning Center for Economic and Policy Research.
“If you make over that cap, like 6% of the population does, you could be paying 1% of your income or even less than that,” noted Sarah Rawlins, program associate at CEPR.CBSNEWS.COM
And the 6% of earners receive no Social Security benefit based on earning above the taxable wage cap. On the other hand, lower income workers receive a higher Social Security benefit because of the programs formula.
For an individual who first becomes eligible for old-age insurance benefits or disability insurance benefits in 2023, or who dies in 2023 before becoming eligible for benefits, his/her PIA (primary insurance amount) will be the sum of:
(a) 90 percent of the first $1,115 of his/her average indexed monthly earnings,
plus(b) 32 percent of his/her average indexed monthly earnings over $1,115 and through $6,721,
plus(c) 15 percent of his/her average indexed monthly earnings over $6,721.SSA.gov
What percent of your income is paid to SS taxes is not the point and never was the intent. Someone earning $160,000 and retiring at FRA receives about 24% income replacement. A worker earning $40,000 receives about 42%.
The great leveler. Your results may vary, but the high income worker needn’t feel shorted because, even though he receives a lower percentage, statistically he will receive it for a longer period. Would you rather receive 40% for 5 years or 24% for 8? Also women will typically receive a smaller benefit amount due to lower earnings but will receive it for a longer time. Social security redistributes income, or wealth, in several ways, but overall is much less progressive than the bend points imply. Some even claim it is regressive.
Either way, as An says, lower case social security is a different thing, even if SS benefits are reduced by 25 percent in 2035(ish), state social welfare programs should pick up the slack for more retired seniors, more so in some states than others.
Now that I think about it, I was wondering why Republicans ( or conservatives?) are more likely to favor reducing, or eliminating SS. Is it because they favor reducing lower case social security in general? Less government, more self reliance?
The definition of (lower case S) “social security” is ‘any government system that provides monetary assistance to people with an inadequate or no income.’ Why do high income earners expect our Social Security program to be equal % for all? I’m sure 100% of those low income workers would gladly exchange their 40% benefit checks for a high income person’s 24% benefit check. Though on the other hand 0% of the high income folks would exchange their 24% benefit check for a low income worker’s 40% check. “From everyone who has been given much, much will be demanded; and from the one who has been entrusted with much, much more will be asked” (Luke 12:48).
It’s not equal. The question how unequal do you want it to be? You cite the bible – so how much do you think is enough to “tithe” to the government? The church was happy with just 10 %.
They’ll say that it’s not “equitable” or “fair” that the amount over the cap isn’t taxed. I don’t think that squares with these concepts, but the left has been trying very hard to change the common meaning of many words (what exactly do they mean by “access” or “justice”?).
Otherwise, I happily made it into the 6 % club last year. I thought that the number over the cap would be at least twice that.