This post excerpted from Restoring America’s Middle Class Starts with Keeping Social Security’s Promise || Part 1 | 2 | 3 | 4
Working Americans and their employers each pay a payroll tax of 6.2% on the first $106,800 of earnings into Social Security. That dedicated revenue, along with interest from the Social Security Trust Fund, finances benefits for retirees, disabled adults, dependent family members, and the children of deceased workers.
The 1980s set the stage for much of the current debate over the deficit and Social Security. First, Congress raised the Social Security payroll tax higher than needed to cover current expenses, in order to build a surplus to help cover the future costs of the baby boomer’s retirement.
Second, Congress lowered income tax rates paid by the very wealthy to the lowest level since 1931. Clinton raised rates, and the economy boomed. Then came the Bush tax cuts of 2001 and 2003.
These low tax rates on the wealthiest were sustained despite nearly a decade of war. Together with high medical inflation, they account for much of the current and projected federal deficit. The effects of the deep recession make the situation worse.
Meanwhile, the Social Security Trust Fund has accumulated over $2.6 trillion. Social Security is in no way responsible for the federal deficit. The rush to link Social Security and the deficit is driven by some who are determined to keep tax rates on the wealthy artificially low, by special interests who want control of Social Security’s assets, and by others who despise Social Security’s very premise – that all work has dignity and that we are all in this together.
Read more from Restoring America’s Middle Class Starts with Keeping Social Security’s Promise »