Apr 24, 2012 10:17 PM GMT
Lifting the payroll tax cap and better coverage by journalists would help build sustainable future for essential program
- Common Dreams staff
The Social Security trust fund is in strong financial standing and the overall program could be further strengthened, say experts and lawmakers, with a simple increase of the current payroll tax cap which is currently set at $110,000. The trustee's annual financial report was released on Monday.
"The most effective way to strengthen Social Security for the next 75 years is to eliminate the cap on the payroll tax on income above $250,000," says Senator Bernie Sanders. (Image: Care2.org) Most mainstream news and media outlets reported the trustee's report as a 'doomsday' scenario for the benefit program, which was created in 1935 and today supports 55 million Americans, including 38 million retired workers, 6 million widows, widowers and orphans, and 11 million disabled workers. But those reports belie a simple solution to improve the longevity and solvency of the program, and speak to a trend of poor-quality reporting when it comes to the issue of Social Security
The most effective way to strengthen Social Security for the next 75 years is to eliminate the cap on the payroll tax on income above $250,000. Right now, someone who earns $110,100 pays the same amount of money into Social Security as a billionaire. That makes no sense,” said Vermont Senator Bernie Sanders, the chairman of the Defending Social Security Caucus. He also chairs the Senate aging subcommittee.
Robert Greenstein, founder and President of the Center on Budget and Policy Priorities, responded to the report by noting that although the program does warrant some adjustments, Social Security "faces no imminent crisis." In fact, he argues, the revenue loss from a permanent extension of the Bush tax cuts (already extended by President Obama) for people making over $250,000 — the top 2 percent of Americans — would itself be nearly as large as the entire Social Security shortfall over the upcoming 75-year period. "Members of Congress cannot simultaneously claim that the tax cuts are affordable while the Social Security shortfall constitutes a dire fiscal threat," he said.
"Projections in the 2012 Trustees Reports come as no surprise to anyone who understands how Social Security and Medicare work," Max Richtman, president of the National Committee to Preserve Social Security and Medicare, said in a statement. "The trust fund solvency date for Social Security has seen fluctuations many times in recent decades, from a depletion date as distant as 2048 in the 1988 report to as soon as 2029 in the 1994 and 1997 reports. This year's report is well within that range. Contrary to the crisis myths perpetuated by fiscal conservatives and many in the media, the prevailing facts show once again that Social Security remains among the nation's most successful and stable programs. The Trustees report there is now $2.7 trillion in the Social Security trust fund, which is $69 billion more than last year, and continues to grow. Payroll contributions and interest will fully cover benefits for decades to come."
Dean Baker, co-director of the Center for Economic and Policy Research, writes today, "The main reason that the program's finances have deteriorated relative to the projected path is that wage growth has not kept pace with the path projected. This is in part due to the fact that productivity growth slowed in the 80s, before accelerating again in the mid-90s and in part due to the fact that much more wage income now goes to people earning above the taxable cap. In 1983 only 10 percent of wage income fell above the cap and escaped taxation. Now more than 18 percent of wage income is above the cap."
And Trudy Lieberman of the Columbia Journalism Review, writing recently on the continued failure to present -- much less advocate for -- the payroll tax cap solution, lamented, "that option is not on Washington’s table, nor has it been discussed much in the press. Why not? Because it doesn’t fit into the doom-and-gloom narrative that has proved politically expedient to tell."
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