There are a lot of small steps that could be taken to save Social Security. Raising the retirement age is not such a hot idea. It penalizes workers who work in more strenuous and low wage jobs, often accompanied by lower life expectancy. It assumes that all potential retirees ae equally able to continue working even if they are in declining health (but not bad enough to qualify for disability).
Let’s explore a couple of options that would shift more of the cost to those who need Social Security least. First, remove or at least greatly increase the cap on how much of your wages and salary are subject to social security taxes. Second, put a cap on the amount of your income that is counted toward determining your benefits. And finally, rethink the COLA.
The first two are not complicated. There has always been a cap on the amount of earnings that are taxed, although there is no good reason for it. Higher income workers often have additional non-wage, non-salary income that is only subject to ordinary income tax, not Social Security taxes. Average workers seldom do. Those who don’t work at all but live off their income from capital don’t contribute anything. Whatever happened to the social part of Social Security, which suggests we are all in this together?
For 2024, that cap on social security taxes is set at a wage and salary income of $168,600, adjusted each year based on the percentage increase in average wages. I don’t see any particular need for a cap, other than lobbyists for wealthier citizens appearing to have the ear of Congress. But if there is a cap, it should be set at something like 80th percentile of wage and salary income. (That’s the amount that has 80% making less and 20% making more.) That way, when people get outrageous salaries for heading a nonprofit, a corporation, a university, or a football program, they will be carrying a fairer share of the cost of keeping our old folks out of poverty.
We don’t want the very wealthy to get more benefits just because they increase their contributions, so the wage /salary base used to compute the monthly check should be capped at some at something like the 60th percentile of the individual’s average wage and salary income used to determine benefits.
Lastly, the COLA or cost of living adjustment , which is based on the inflation rate for the 12 months ending the previous June 30th. COLAs are a great engine of inequality. In South Carolina, pension reform a decade ago included a cap on increases.. We state retirees get a one percent increase every year regardless of actual inflation, but there is a cap is of $500. That’s one percent of $50,000. Any pension greater than that gets the same $500 a year raise.
Think about it. Jane’s Social security benefit check is $2,000, just a shade above the average of $1907. average, about $1900. Dick’s check is the maximum of $4873, which we will round down to $4800 for easy calculation. . Both must contend with higher prices for housing, groceries, and insurance. This year’s 2.5% COLA gives Jane $50 more a month while Dick gets an extra $120. The percentage gap between their incomes is unchanged, but percentages don’t pay the electric bill. The dollar gap has risen from $2800 to $2870, and that gap grows year after year.A cap on the COLA like South Carolina’s (about $5 a month) would be more equalizing. Or setting the cap at the COLA percentage of the average benefit and give that to everyone, which would do ven more fot those at the bottom of the scale. Let’s think creatively here!
After we survive the election, let’s go back to thinking about how a civilized society that believes in fairness would shore up Social Security with more revenue and slower growth of overall benefit, with the scales tipped toward the lower half of the income spectrum. And January is not too soon to get started. We can call it The Other Project 2025.
PurpleSage41 