Examining the Link Between Social Security and Taxes
April 15th was “tax day” — the deadline to file your federal income tax. So, this seems like the perfect time to examine the link between Social Security and taxes.
According to the Social Security Administration’s publication Understanding the Benefits, when you work, you pay taxes into Social Security for the agency to use to pay benefits. Currently, you pay taxes of 6.2 percent and your employer pays 6.2 percent. You see this as FICA on your paycheck. The tax is 12.4 percent for self-employed.
Social Security Trust Fund
It’s important to point out that the money you pay in taxes is not held in a personal account. Rather, Social Security uses your tax money to pay people who are currently receiving benefits. Any unused money goes into the Social Security trust funds. Your benefits, once you retire, will be paid from the trust fund.
Because there are more people receiving benefits or due to in the near future than there are people currently paying taxes in the workforce, there is grave concern over the long-term solvency of the Social Security program. There are predictions that Social Security will have to start tapping into its trust fund in about 10 years and if things don’t change it could be forced to cut benefits by about 20 percent. This means future beneficiaries will not receive the full amount they were promised.
Scrap the Cap
Another cause for concern is the way our Social Security system is set up. You pay Social Security taxes based on your earnings, up to a certain amount known as the wage cap. This year, that amount is $168,600. That means any income over that amount is not taxed. Many people believe this is unfair and are calling on higher wage earners to pay their fair share. There’s actually a nickname for this movement. It’s called Scrap the Cap.
Saving Social Security
The Seniors Trust is determined to make certain Social Security is there for current and future retirees. We are is working diligently to enact the Social Security Expansion Act. When passed, this legislation will make four major changes to Social Security for retirees:
• Increase benefits for most recipients by about $200 per month.
• Establish a fair Social Security Cost-of-Living Adjustment (COLA) using the Consumer Price Index for Elderly (CPI-E), which takes the unique spending habits of seniors into account — particularly regarding the cost of healthcare
• Increase minimum Social Security benefits to provide higher payments to seniors and greatly reduce senior poverty.
• Guarantee the long-term solvency of the Social Security program.
You can show your solidarity with The Seniors Trust by signing our petition to Congress.
