Seventy nine percent of older Americans think the highest -earning workers should be paying Social Security taxes on all of their wages, just like other workers do, according to recent survey by The Senior Citizens League (TSCL). "The issue is a top priority with older voters, many of whom are outraged at recent legislative proposals to cut Social Security benefits and cost-of-living adjustments," says Mary Johnson, a Social Security policy analyst for TSCL.
"TSCL surveys indicate there is no support for benefit cuts among older voters," Johnson says. "We have learned, however, that there is widespread support to boost the amount of wages subject to the Social Security payroll tax, and to provide more adequate Social Security income," she says. "Raising the Social Security taxable maximum is a way to do both," she points out.
The primary means of financing the benefits of the nation's 61 million Social Security recipients is a 6.2% payroll tax that is paid by employees and matched by employers - a total of 12.4%. Current law, however, imposes a limit on the amount of wages that are taxed for Social Security purposes, which is $127,200 in 2017.
"Because Social Security benefits are based on wages, the Social Security cap on earnings also limits the initial retirement benefit that higher earners receive when they retire," Johnson explains. "In fact, all Social Security recipients are wrestling with growing income inadequacy as benefits replace a shrinking portion of wages, and this is especially true for those who earn more than the taxable maximum," Johnson says.
The Social Security taxable maximum is tied to the wage index, but according to the Congressional Budget Office (CBO), the limit on the amount of wages that can be taxed has not kept up with the growth of wages of the most highly paid workers. Because wages for high - income earners are growing faster than for other workers, the taxable share of the nation's earnings subject to Social Security payroll taxes is falling -- from 90 percent in 1983 to 82 percent in 2015. The trend is forecast to continue, with the CBO projecting the share of earnings subject to payroll taxation to drop to below 78 percent by 2026.
The CBO estimated last November that if lawmakers wished to raise the amount of covered earnings subject to the payroll tax to 90 percent of covered earnings, then the taxable maximum would need to be set at $316,400 in 2017 and to rise to $565,000 by 2026.
"Legislation was introduced in December that would impose deep benefit cuts," Johnson notes, "but had no provisions to provide new revenues. Lifting the taxable maximum cap would provide new revenues to Social Security and it could also provide a modest boost to Social Security benefits, and more adequate COLAs to all people when they retire," Johnson points out. "Our lawmakers should not be allowed to hide this option under the rug," she says. "Raising the payroll taxable maximum is the means of providing greater retirement security and long - term program solvency, " Johnson says. "We can save Social Security without the deep cuts."
What do you think about proposals to cut Social Security or Medicare benefits? Visit www.SeniorsLeague.org to participate in TSCL's annual Senior Survey.
:: Data confirms if the government used Consumer Price Index for the Elderly to calculate COLA for 2017 instead of the index currently used, Social Security benefits would be 2.1 percent higher...Full Story