Fred Goldenberg: Raise the Ceiling and Save Social Security | Business
On Jan. 1, 2022 — 61 seconds into the new year — Jeff Bezos hit his Social Security payroll tax income cap.
The world’s richest man, whose net worth is more than $200 billion, paid Social Security his 6.2% payroll tax withholding of $9,114 – based on the income cap set by Congress at $147,000 for 2022.
Those who are just mere millionaires had to work until February 23, 2022 to reach this income cap and pay their maximum social security contribution for 2022.
Again, those of us who can and should contribute more do not.
Most Americans pay 6.2% of their salary to Social Security.
But according to the Center for Economic Policy Research, the effective tax rate for the wealthy is significantly lower, “in some cases as low as 0.08%.” Therefore, “the burden of social security contributions falls more heavily on those who earn less”.
Those earning $147,000 or less will pay the full 6.2% to Social Security. But after years of income inequality, more and more people are now above the ceiling – and their share continues to fall.
The capping of social contributions according to the level of wages deprives Social Security of much-needed income. If Congress doesn’t act to rectify the situation, the Social Security Trust Fund is expected to be depleted by 2034. At that time, benefits will be significantly reduced – by at least 22%.
If the past two years have taught us anything, it’s that Social Security has been a major lifeline for the elderly, disabled workers, and families living on survivor benefits while coping with COVID-19.
That it’s in jeopardy is frightening enough — but that there are members of Congress today who continue to advocate the complete elimination of Social Security — of what President Biden has called the “greatest trust.” most sacred” – baffles me endlessly.
According to the Bureau of Labor Statistics, the average salary in the 4th quarter of 2021 was $1,010 per week. So, if multiplied by 52 weeks, the average annual Social Security contribution was $3,231. For those earning $147.00, it was $9,114. This is based on 116.3 million workers at all levels.
In 1993, Congress acted to ensure the survival of Medicare by removing caps on payroll tax limits and imposing a 1.45% Medicare tax on all earnings. This means that everyone contributes to Medicare 52 weeks per year. Each worker contributes $761.54 per year. It’s almost $89 billion. As we know, even that is too low for the ever-increasing medical cost we all face.
But at least everyone contributes a fair share to Medicare based on their salary.
Doing the same for Social Security makes sense.
Even the group called Patriotic Millionaires, an organization made up of wealthy individuals, has come out in favor of eliminating the Social Security payroll tax cap. They point out on their website that the very wealthy had “a financial field day” during the pandemic. America’s 740 billionaires have increased their combined wealth by at least $2 trillion over the past two years “at the same time that the incomes of 99% of humanity have fallen”.
The idea of removing or adjusting the cap has been floated several times in Washington, DC. Each time it was rebuffed by those more inclined to eliminate and then expand Social Security.
There is a chance right now that this situation can be corrected with the adoption of Rep. John Larson (D-Conn) Social Security 2100 Sacred Trust Act. The bill would adjust the cap so that annual salaries up to $400,000 would be subject to Social Security payroll taxes. This increase would only affect the richest 0.4% of employees. But that would extend the solvency of Social Security.
Social Security 2100 has some 200 co-sponsors (all Democrats). A floor vote would force Republicans who pretend to protect Social Security but continue to undermine it to be registered for the first time in decades.
Call Jack Bergman (231-944-7633) and ask him to co-sponsor the bill. Let me know how it goes.
Fred L. Goldenberg is a Certified Senior Advisor (CSA) and owner of Senior Benefit Solutions, LLC, a certified health insurance and financial services organization, now affiliated with Michigan Planners, in Traverse City. Questions or comments regarding this column or interest in our monthly Medicare classes can be directed to (231) 944-1400 (option #1, option #5) or [email protected]