What Congress Needs to Do to Fortify the Social Security Trust Fund
There has been much talk and speculation lately that Social Security is going broke. Although that is not true, there is cause for concern regarding the long-term solvency of the program. Much of the reason is due to the fact that Social Security’s primary source of funding is payroll taxes and with the bulk of the Baby Boomer generation reaching retirement age in the coming years, the system will soon be doling out more in benefits than it’s taking in through payroll taxes. The solution seems simple enough — raise Social Security taxes.
Scrap the Cap
The problem is, it’s not that straightforward. Let’s begin by looking at how the Social Security payroll tax is collected. All workers are required to pay a 12.4 percent Social Security tax on their earnings up to the annual wage cap limit — in 2022 that’s $147,000. If you work for someone else, that’s split between you and your employer with each paying 6.2 percent. But, if you’re self-employed, then you have to pay the full 12.4 percent yourself. The important thing to keep in mind is that taxes are only collected on income up to $147,000 — anything above that is not taxed.
Many people believe this is not fair and, in fact, they claim the system is set up to benefit higher wage earners. That’s because a person earning $147,000 pays the same amount in taxes as someone making $500,000 or even $1 million a year. A more equitable way to beef up the Social Security trust fund would be to lift the wage cap, rather than raise taxes.
Long Term Solvency
That idea is actually one of the tenets of The Social Security Expansion Act. This landmark piece of legislation calls for lifting the cap on Social Security taxes to ensure that the wealthiest Americans pay a fairer amount in relation to their income. The bill’s sponsors say doing so could extend the solvency of Social Security for the next 75 years. A study by the Center for Economic and Policy Research supports the theory that by lifting the wage cap we could strengthen the long-term solvency of Social Security.
In addition to strengthening the Social Security program, the Social Security Expansion Act also calls for increased monthly benefits of about $200 for retirees and enacting an annual cost-of-living adjustment that is fairer to seniors and their unique spending habits.
The Seniors Trust is working to pass The Social Security Expansion Act. Please, sign our petition to Congress and join us as we strive to improve the lives of senior citizens.
