Social Security trustees in 2021 claim the Social Security trust fund will be exhausted by 2034. We’ve heard this dire warning for decades. Don’t fall for it. The US Social Security System suffers from inequity, not insolvency.
The last time you heard about Social Security running short of funds you probably heard someone say we’d have to raise the age of eligibility or lower the benefits. What you almost never hear about is the income cap enjoyed by high earners.
For the 2021 tax year, the Social Security Administration set the income cap at $142,800. This means that a company president earning a $300,000 salary pays Social Security tax on less than 50% of earnings while a retail manager earning a $50,000 salary pays the tax on 100% of earnings.
Lifting the Social Security income cap is a logical way to tackle the program’s deficit. Removing the cap entirely could help eliminate the regressive Social Security tax structure and replenish the Social Security coffers.
About 20% of US households earn $150,000 or more annually. The top 19% of US households in 2021 earn $146,000 or more. In 2018, the top 20% took in half of all US income. That’s a lot of extra tax revenue left on the table that could fortify the Social Security safety net.
All signs point to Social Security’s growing importance as the primary retirement income source for most Americans. US statistics on personal retirement savings paint a dire picture. Forty-two percent of Americans have less than $10,000 saved for retirement, and fourteen percent of Americans have $0 saved for retirement.
When asked, the primary reasons Americans offer for having no savings include not making enough money, prioritizing debt reduction, no retirement savings plan offered by employer, and using savings for an emergency.
As US wealth consolidates in the top 1%, studies show widening socioeconomic disparities. Ensuring the viability of our Social Security system is more important than ever. Faced with diminished access to pension programs, Social Security will comprise a larger percentage, if not all, of many Americans’ retirement income.
As the bedrock of American retirement income, Congress should be planning to expand, not further limit, Social Security benefits. Social Security isn’t a broken system. We haven’t exhausted all the options in our toolkit.
Shannon Skinner, Bellingham