One of the comments on my last diary post questioned my ideas regarding Social Security and I felt it required that I write in greater detail about my stance on Social Security. Before I begin, I would like to let you know that I have studied the problem and, in fact, was asked to be the spokesperson for the Lake Erie Alliance for Democracy on the issue when Senator Santorum came to Erie to discuss the President's proposal for privatization.
It is a demographic reality that around the year 2040, the present Social Security system will have the resources to pay out only 70% of the benefits it currently pays. It is also a reality that the current system of taxation asks people to pay 6.2% of salaries and wages toward the system up to $90,000 of monies earned. Beyond $90,000, as of this moment, there are no Social Security taxes. The 6.2% paid by workers is matched by an equal amount from the employer.
My plan to save Social Security is simply to lift that $90,000 cap on earnings so that the 6.2% would be paid on all wages and salaries. As the system exists now, the wealthiest Americans (i.e. those who earn more than $90,000) pay a lower percentage than 6.2% because portions of their income--in many cases, huge portions--simply go untaxed.
To understand the magnitude of the problem and the horribly unfair burden which those Americans making less than $90,000 bear, it is necessary to look at some statistics. In quoting them, I will cite the sources from which I obtained them.
According to the Internal Revenue Service of the Federal Government in its report on incomes in the year 2001 (the last year for which complete figures were available when I did my research), the amount of wages and salaries earned was $4.56 trillion dollars. Mind you, these are wages and salaries only--in other words, only those monies susceptible to the Social Security tax. (Source: IRS report of Individual Incomes for 2001, Table 1.3) Let us examine who earned this money.
The top 10% of wage earners were responsible for earning 65.73% and, indeed, paid 65.73% of the income taxes collected. (Source: The Tax Foundation, Summary of Federal Individual Income Tax Data for 2002. Note: the reconciliation of the 2001 and 2002 data show that they are virtually the same.) Moreover, the top 10% of wage earners all make over $92,663 according to the same source. Think about this for a moment. What it means is that the wealthiest Americans earn nearly two-thirds of the individual income, yet pay no Social Security tax on most of it.
If we take the roughly 65% of wages and multiply it against the $4.56 trillion in total wages, we can see that about $2.9 trillion dollars was above the $90,000 cap and thus not subject to Social Security taxes. At 6.2%, that comes to about $180 billion of potential Social Security revenue not collected.
My proposal is to collect it and put it into the Social Security Trust Fund so that it can accumulate interest and grow from now until the year 2040. The criticism that the resultant $25 trillion (which is what you get with $180 billion per year for 35 years at modest interest growth rates) might be "stolen" by an unscrupulous Congress does not alter the mathematical viability of the proposal. And the viability is easily turned from "mathematical" to "actual" with legislation which would prohibit "raiding" the trust fund. In fact, it is currently illegal to take money from the Social Security trusts. "The trust funds were created in the U.S. Treasury to account for all program income and disbursements...Benefit payments and program administrative costs are the only [my emphasis] purposes for which disbursements from the funds can be made." (Source: Summary of the 2005 Annual Social Security and Medicare Trust Fund Reports.)
It is to me unconscionable that the wealthiest among us pay the least percentage of the Social Security tax. In fact, the wealthier an individual is, the lower the percentage. Moreover, my plan does not propose to increase the employer's share of the tax since many businesses today are barely holding on because of the unfair trade practices with which they must deal. This being said, however, I surely see no reason why companies like the oil companies could not be asked to pay more since their profits are at such windfall levels.
The argument that a solution is not viable because someone is going to abuse the system has no standing with me. It could be applied to anything and result in the dismissal of any solution. Why have banks? Someone is bound to rob them. Why have driver's licenses? Someone is bound to drive without one. The possibilities of abuse exist everywhere. The answer to them, in this case, is an honest Congress and the "eternal vigilance" of the American people, to quote Mr. Jefferson.
I consider my solution to the eventual insolvency of the Social Security system to be easily workable and extremely egalitarian. I hope you agree.
Dr. Steven Porter
PA-3