To: President Donald Trump, The United States House of Representatives, and The United States Senate
Fixing Social Security
Eliminate the cap on earnings subject to Social Security; restore the 2% funding cut which is currently reimbursed from the General Fund.; and increase the total rate to cover the remaining shortfall.
Why is this important?
Social Security is an earned benefit. In order to collect a retirement or disability benefit, a worker must pay into the system for at least 10 years. In some cases, nonworking family members, such as a spouse, may be eligible for benefits based on the worker’s record. Tough rules in place assure that only legal residents and citizens who have met the 10-year qualification can collect retirement benefits. Congress and the media should stop referring to Social Security as an "Entitlement" inferring that it is unearned.
The Social Security payroll tax currently applies to annual earnings up to $110,100. Any wages earned above $110,100 go untaxed for Social Security. Only 6 percent of workers earn more than that and effectively end up paying less than the 6.2% of his or her total earnings. This cap was intended to increase every year with increases in the national average wage; but was not increased in the last three years. Today, the cap covers about 84 percent of total earnings. Eliminating the cap so that all earnings would be subject to Social Security’s payroll tax would help close the program’s funding gap. If your income is under $110,100, you would see no change. If you make above that amount, you (as well as your employer) would currently pay the 6.2 percent payroll tax on your remaining wages. If all earnings were immediately subject to the Social Security tax, the new revenue is estimated to fill 86 percent of the funding gap and equalize the Social Security tax rate, so that all workers would pay the same percent on their earnings
Beginning in 1950 the rates were adjusted upward to reflect the rise in inflation and the costs of living on a regular basis. There has not been a rate increase since 1995. The last rate increase was .14% from 1994 to 1995. A small increase in the rate could fill the remaining 14% gap in funding and would only minimally affect employees. Employers already factor this tax into their compensation packages and can adjust accordingly.
The Social Security payroll tax currently applies to annual earnings up to $110,100. Any wages earned above $110,100 go untaxed for Social Security. Only 6 percent of workers earn more than that and effectively end up paying less than the 6.2% of his or her total earnings. This cap was intended to increase every year with increases in the national average wage; but was not increased in the last three years. Today, the cap covers about 84 percent of total earnings. Eliminating the cap so that all earnings would be subject to Social Security’s payroll tax would help close the program’s funding gap. If your income is under $110,100, you would see no change. If you make above that amount, you (as well as your employer) would currently pay the 6.2 percent payroll tax on your remaining wages. If all earnings were immediately subject to the Social Security tax, the new revenue is estimated to fill 86 percent of the funding gap and equalize the Social Security tax rate, so that all workers would pay the same percent on their earnings
Beginning in 1950 the rates were adjusted upward to reflect the rise in inflation and the costs of living on a regular basis. There has not been a rate increase since 1995. The last rate increase was .14% from 1994 to 1995. A small increase in the rate could fill the remaining 14% gap in funding and would only minimally affect employees. Employers already factor this tax into their compensation packages and can adjust accordingly.