Millionaires Stop Paying Into Social Security for the Year, Highlighting Need to Scrap Payroll Tax Cap

Image: Philip Taylor via Flickr Creative Commons, https://flic.kr/p/bDdcmL

[Common Dreams] Today, not even two full months into 2020, millionaires will stop paying into Social Security for the year due to the program’s payroll tax cap.

The cap limits annual wages subject to the Social Security payroll tax to the first $137,700. Sarah Rawlins, program associate at the Center for Economic and Policy Research (CEPR), wrote Tuesday that the cap means “someone who makes $1,000,000 per year stops paying into the program on February 19, 2020.”

“That makes a millionaire’s effective tax rate well below the 6.2% of income that most Americans pay,” Rawlins noted. “Instead, it is less than 1% of a millionaire’s income. The Social Security tax is only levied on wages, excluding income from other sources like capital gains, meaning those with wages over the cap likely have an effective tax rate even lower than this estimate.”

“The burden of Social Security taxes falls more heavily on those who make less,” Rawlins added.

Rawlins suggested that one way to make the Social Security financing system more progressive is “scrapping the payroll tax cap entirely and making everyone pay the same tax rate.”

“Social Security gives retirement, disability, and survivor benefits to almost 20 percent of the U.S. population, including at least six million children,” Rawlins said. “But it could do better.”

Rep. John Larson’s (D-Conn.) Social Security 2100 Act, introduced in the House in January 2019 with 208 Democratic co-sponsors, would apply the payroll tax to wages above $400,000.

Sen. Bernie Sanders (I-Vt.), a 2020 Democratic presidential candidate, has proposed subjecting all income above $250,000 in order to “expand benefits across-the-board, including a $1,300 a year benefit increase for seniors with incomes of $16,000 a year or less.”

As Common Dreams reported last December, an analysis by Boston College’s Center for Retirement Research found that Social Security has become increasingly regressive in recent decades due to a number of factors, including soaring economic inequality.

“The program’s become less progressive,” said Jim Roosevelt, a former associate commissioner for retirement policy at the Social Security Administration and a grandson of former President Franklin Delano Roosevelt, who signed the Social Security Act into law in 1935.

“It doesn’t take care of the people at the lower- and middle-income levels as well as it was intended do,” Roosevelt said, “and it needs to be updated.”

Bloomberg (Still) Wants to Cut Social Security

Michael Bloomberg | Image: Azi Paybarah, https://flic.kr/p/61DFNL

[Common Dreams] Of all the Democrats contending for the presidential nomination, Michael Bloomberg is the worst choice to debate Donald Trump on an overwhelmingly important issue: Social Security’s future. Bloomberg’s position on Social Security is to the right of Trump’s stated position — and widely out of step with even Republican voters, let alone Democrats.

Bloomberg has a long history of supporting cuts to Social Security, including raising the retirement age. He’s disparaged Social Security, one of the most popular and successful government programs in history, by comparing it to Bernie Madoff’s Ponzi scheme. He was an enthusiastic supporter of the Bowles-Simpson austerity commission, which tried to jam through huge Social Security cuts behind closed doors.

Now, Bloomberg is running to be the Democratic nominee for President — even though he was a Republican for years, and only became a Democrat in 2018. For months, Bloomberg was the only major candidate without a Social Security plan. Now, he’s finally released one.

Bloomberg’s Social Security plan is very carefully worded. Unlike Bloomberg’s past statements, the plan does not overtly endorse Social Security cuts. That’s no surprise, since cutting Social Security is incredibly unpopular with voters across the political spectrum. But a close read reveals that Bloomberg hasn’t changed his views. He’s just gotten smarter about hiding them.

The plan says that Bloomberg would “consider options for preserving and strengthening Social Security’s long-term finances, while maintaining and enhancing benefits for the neediest recipients.” Bloomberg does not specify what these “options” are. But what he doesn’t say speaks volumes.

Politicians that want to cut Social Security but don’t want to be held accountable at the ballot box think they can sound reasonable, while hiding their true views, by arguing that all options should be on the table. This is a cynical way of avoiding taking a public position. Moreover, it is a conservative dream to maintain benefits for the poorest Americans while slashing them for the middle class, transforming Social Security so that it’s no longer earned insurance. Social Security’s earned nature is what makes it so effective and politically strong.

When their public positions are popular, politicians have no trouble articulating them. No politician hides support for cutting middle class taxes. Similarly, every other Democratic candidate has said unequivocally that they support expanding Social Security, and oppose cutting it. They all support restoring Social Security to long range balance by requiring those at the top to pay their fair share.

Even Donald Trump has said as recently as the State of the Union that he won’t cut Social Security. This, of course, is a lie, since a week later he released a budget that does cut it.  But, he is certain to keep lying in the lead up to the election.

It wouldn’t have been difficult for Bloomberg to release a plan that unequivocally rules out cuts. Bernie Sanders’ plan does, as does Elizabeth Warren’s. Pete Buttigieg’s plan says that he would “fully protect Social Security for the next generation without cutting anyone’s benefits by ensuring the most fortunate pay their fair share.” Joe Biden’s plan says that he would “put the program on a path to long-term solvency by asking Americans with especially high wages to pay the same taxes on those earnings that middle-class families pay.”

Neither Biden nor Buttigieg should be fully trusted on Social Security. Like Bloomberg, Biden has a record of supporting cuts. Buttigieg recently made the error of embracing austerity economics. That said, both Biden and Buttigieg make it clear on their websites that they are running on protecting and expanding, never cutting, Social Security.

For those who have followed the Social Security debate closely, Bloomberg’s words about “options” are a clear signal. His language is insider speak, a wink and a nod to the donor class that he, like them, favors cutting Social Security. His promises to “strengthen” and “preserve” Social Security are meaningless. Those words are frequently used by billionaire elites like Bloomberg as code for “cut Social Security to save it.” Nor does Bloomberg’s support of targeted Social Security increases inspire confidence. Bowles-Simpson also included targeted benefit increases, alongside huge cuts to overall benefits. So did Paul Ryan’s plans.

To get right on Social Security, Bloomberg must repudiate his past support for cuts. He must pledge that he will never support cutting a single penny of current or future benefits. Unless that happens, supporters of Social Security should consider him an enemy of the program —  and vote accordingly in the Democratic primary. 

Nancy J. Altman is president of Social Security Works and chair of the Strengthen Social Security coalition. She has a 40-year background in the areas of Social Security and private pensions. Her latest book is The Truth About Social Security. She is also the author of The Battle for Social Security and co-author of Social Security Works!

Linda Benesch is the Communications Director at Social Security Works, a national organization fighting to address our nation’s retirement income crisis by protecting and expanding Social Security.

Social Security: Where Do the 2020 Candidates Stand?

[New York Times] No topic is more important than Social Security to the well-being of today’s older voters — and younger workers who will come to rely on the program. Nearly all Americans pay into the program and can expect to receive a benefit. It is the largest retirement income source for a majority of older households.

Just 52 percent of households owned retirement accounts in 2016, according to Federal Reserve data. And at a time when fewer retirees can rely on traditional pensions, Social Security will be the only source of guaranteed lifetime income for most workers. Benefits are adjusted annually for inflation — a unique feature that adds substantially to Social Security’s value.

Read more: New York Times »

Trump’s audacious new plan to cut Medicaid, explained

President Donald J. Trump with (clockwise from left) Ms.Seema Verma, Administrator of the Centers for Medicare and Medicaid Services, Secretary Tom Price, U.S. Secretary of Health and Human Services, and Vice President Mike Pence on March 14, 2017, in the Oval Office of the White House. Image: Flickr Creative Commons | https://flic.kr/p/U3Tp7r

[Vox] President Donald Trump’s administration is taking its most audacious step yet to roll back Medicaid, with a new plan that would cap spending for the government program upon which poor Americans depend for health insurance.

The Centers for Medicare and Medicaid Services announced on Thursday they would accept applications from states that want to set up a Medicaid block grant, a long-held goal of ideological conservatives who want to scale back the social safety net, and one deployed successfully to severely limit cash welfare benefits in the 1990s.

These spending caps would fundamentally change how the program is financed, ending Medicaid’s days as an open-ended entitlement by putting new hard limits on how much the government is willing to spend on health care for certain enrollees. Medicaid would no longer pay whatever is necessary to provide medical care to the people in or near poverty who qualify for its benefits. Instead, spending would be limited in states that got a waiver from the federal government, and they could impose cuts on benefits.

Trump has already tried to fundamentally alter the Medicaid program through work requirements, though he’s been stopped in the courts. But the block grants represent an even more basic remaking of Medicaid on his watch, one that would lead to spending cuts and fewer benefits.

The block grants are also, like work requirements, a roundabout way to roll back Obamacare’s expansion of Medicaid specifically. Under the guidance released by CMS, it would be benefits for people newly eligible under the health care law — mostly childless adults and parents who are living in or near poverty — that would be subject to the block grants. In that context, despite Trump’s campaign promise not to cut Medicaid, these policies make sense as a means to an end for the conservatives whom Trump has put in charge of his health department.

Block grants could run into trouble in the courts, just as Medicaid work requirements already have, if judges find they are contrary to the purpose of the Medicaid program (which is supposed to be providing medical benefits to vulnerable people).

But Trump’s latest steps to pare back Medicaid, taken early in an election year, are a reminder that his administration has proven steadily committed to cutting federal health care spending.

Read more [Vox]»

Working Longer Is A Lame Answer For Failing Pensions. We Need A Gray New Deal.

Image: Scott Lewis via Flickr Creative Commons, https://flic.kr/p/qZzNYX

[Forbes.com] It’s a journalism cliche that reporters always highlight the bad: they never write about the planes that don’t crash or the companies that don’t lie and cheat. But the topic of working into old age seems to be one of the most consistent exceptions. Most every example of journalism about working longer is of someone for whom working in their 70s, 80s, 90s is full of joy; everything has gone right! 

Often these stories have not a single proviso that working longer in a nice job—a job that doesn’t break down health and spirits or take away from important end-of-life leisure—might be a scarce privilege that class status affords. 

For example, John D. Stoll began a Wall Street Journal article last week on “the end of retirement” with the following: “It took about six years of annual asset reviews with my financial planner…” When I read that, I knew the focus would not be on the typical worker approaching retirement. Instead, it focused on the ability of a privileged slice of professional workers to work as long as they please, however they please.

Most Americans don’t have that luxury. Without decent pensions, working longer is not the answer for most people. For the first time in modern history, the American elderly will be relatively worse off than their parents and grandparents. Many will turn to work—any kind of work. The failing do-it-yourself American pension system will cause humanitarian and political crises unless we find a better way.

Read more: Forbes.com »

Which Democrat is most committed to protecting Social Security?

[Washington Post] In recent days, Sen. Bernie Sanders (I-Vt.) has been attacking Joe Biden for flirting with the idea of Social Security cuts over the course of his career; Sen. Elizabeth Warren (D-Mass.) has now joined Sanders in criticizing Biden. Biden is hitting back angrily over a video that takes some of his comments on the topic out of context.

So let’s put aside the criticisms and counter-criticisms and focus on three questions: What’s the problem with Social Security? What do the candidates want to do about it? And how is this likely to play out in the general election?

We’ll do the wonky part first, but to understand it you have to remember that there exists a center-right consensus that deficits are a dire threat to the republic, and it’s worth making painful cuts to government services to reduce them. It’s hard to overstate how powerful this idea has been in Washington; there are entire organizations, well-funded by wealthy people and corporations, whose mission is to spread panic about deficits and urge cuts to entitlement programs (with perhaps some tax increases here and there).

When it comes to Social Security in particular (which has its own funding apart from the rest of the federal budget), the deficit scolds argue that the program is “going broke,” a falsehood meant to convince people that if radical steps aren’t taken soon — including benefit cuts — the program will be unable to provide benefits for retirees.

But the program is not “going broke.” With the retirement of the baby boom generation, Social Security is now giving out more in benefits than it takes in, but this isn’t some kind of unforeseen emergency. It’s exactly what we knew would happen, and it’s the reason the Social Security Trust Fund exists: to make up the shortfall.

According to the latest Social Security trustees report, that trust fund will be exhausted in 2035 (for old-age pensions; the fund for disability benefits has enough reserves to last until 2052). At that point, if the projections are accurate, the program will still be able to provide about three-quarters of benefits.

Getting three-quarters of your scheduled benefits is worse than getting 100 percent. But it’s not nothing. So how do we fix it?

Full story: Washington Post »

Social Security Benefits Are Modest: Benefit Cuts Would Cause Hardship for Many

Image: Penn State via Flickr Creative Commons (https://flic.kr/p/MzurY5)

[Center on Budget and Policy Priorities] Social Security benefits are a perennial target for cuts because the program faces a long-run shortfall. Some lawmakers and opinion leaders mistakenly portray the program’s benefits as lavish. The fact is, benefits are modest and workers have earned them by paying into Social Security — protecting themselves and their families if they retire, become disabled, or die leaving family members to support.

Here are five key facts that policymakers need to keep in mind:

  1. Social Security benefits are modest.
  2. Most beneficiaries rely on Social Security for most of their income.
  3. For most seniors, Social Security is the only income they receive that’s guaranteed to last as long as they live and to provide full inflation protection.
  4. Social Security benefits in the United States are lower than many other developed countries.
  5. Future retirees already face lower benefits (relative to their past earnings) than current retirees because of a rising Social Security retirement age and escalating Medicare premiums.

These facts argue for avoiding cuts in future benefits — a position that the majority of Americans support strongly.[1]

Social Security faces a real but manageable long-term shortfall. The program’s trustees project that its trust fund reserves will last until 2035, and that even after that, tax revenue anticipated under current law would support three-fourths of scheduled benefits. Social Security’s fundamental challenge is demographic, traceable to a rising number of beneficiaries rather than to escalating costs per beneficiary. In the mid-2030s, when the large baby boom generation exerts its greatest demographic pressure, benefits will cost just under 6 percent of Gross Domestic Product (GDP), up from 5 percent today.[2]

There is no imminent crisis, and policymakers have time to put Social Security on sound financial footing. However, they shouldn’t wait until the last minute because a carefully crafted solvency package could strengthen public confidence in the program, share sacrifices fairly across generations, and give workers plenty of notice so that they can plan their work, saving, and retirement.

Read the rest: Center on Budget and Policy Priorities »