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Social Security’s Income Inequality Problem
Sean Williams notes demographic changes are primarily responsible for Social Security’s rapidly growing unfunded obligations, as people live longer and fewer workers contribute payroll taxes. Also, a larger percentage of earned income is escaping Social Security’s payroll tax than ever before, chiefly investment income. The solution oft proposed is to tax the rich more, usually by raising the cap where contribitions stop (currently $168,600). It sounds great in theory, but the added revenue is not enough to solve Social Security’s financial woes, as higher taxes add minimal years of financial solvency. Full article here.
As an example of the leading thoughts on reforming Social Security, the Association of Mature American Citizens (AMAC, Inc.) believes Social Security must be preserved and modernized. This can be achieved without tax increases by slight modifications to cost-of-living adjustments and payments to high-income beneficiaries plus gradually increasing the full (but not early) retirement age. AMAC Action, AMAC’s advocacy arm, supports an increase in the threshold where benefits are taxed and then indexing for inflation, and calls for eliminating the reduction in people’s benefits for those choosing to work before full retirement age. AMAC is resolute in its mission that Social Security be preserved for current and successive generations and has gotten the attention of lawmakers in D.C., meeting with many congressional offices and staff over the past decade.