Today, February 10, marks the day when the top one percent of wage earners in America stop paying into Social Security. This is because, right now, only the first $118,500 of a wage earner’s income is subject to the payroll tax that funds Social Security. Call it their Social Security Tax Freedom Day. Yay! In fact for some Americans, about 900 of us, that day comes on January 2, just two days into the new year.
Most of us common folk don't even know there is a wage cap on the SS tax because we just don’t make that much. Most of us pay Social Security tax all year, right to the end. Every paycheck has SS tax deducted. Unless your income increases because of a raise, the combined SS tax and Medicare tax (called “FICA” on your pay stub) never changes.
This special tax break for the rich is hidden from most of us so we don't complain. High wage earners know about the cap however, because sometime before the end of the year, their accumulated yearly wages hit the magic cap "and then their after-tax pay suddenly increases by more than 6% — a big jump for most of them. Almost all of these people remember that day, because they suddenly have more spending money, and they’ll have that money for whole rest of the year." http://americablog.com/...
So with the GOP warning that Social Security is nearing collapse they are proposing the only possible solution that makes sense to them--cutting benefits! Never mind that cutting benefits hurts the people who need them the most. Never mind that, according to Senator Bernie Sanders, "since its implementation in 1935, Social Security has lowered the poverty rate amongst seniors from about 50% to less than 10%. And today it also covers 11 million Americans living with disabilities including 3 million children, making it the most successful social program in our country’s history." And never mind that Social Security has $2.8 trillion dollar surplus and will be able to pay 100% of benefits for every recipient for the next 18 years.
Surely there must be a better way. Could there be a solution that the Republicans are overlooking? Well, yes. How about raising that cap just a little bit? Or better yet just remove it altogether from the top 900 earners.
Teresa Ghilarducci, an economist at the New School says that removing the wage cap on the Social Security tax is the best way to shore up Social Security. With the cap removed for top earners, she wrote, "the Social Security system would be solvent indefinitely and they still would be the richest and prettiest in all the land." http://www.latimes.com/...
Instead of cutting benefits, in the words of Bernie, "all we need to do is ask millionaires and billionaires to start paying their fair share and we not only extend the life of the Social Security trust fund, we can afford to expand benefits for millions of Americans."
Proposals to eliminate or significantly raise the tax cap are not new and one was advanced by Sen. Tom Harkin (D-Iowa). This of course was dismissed by the GOP and their wealthy supporters.
The focus of the Social Security debate in Washington remains benefit-cutting. And leading the call for cuts are many corporate CEOs like David Cote of Honeywell. He's a member of the CEO steering committee of Fix the Debt, an anti-deficit organization backed by hedge fund billionaire Peter G. Peterson that rails incessantly about the need to rein in "entitlement" programs such as Social Security and Medicare.
Cote earned $33.2 million in 2012, the latest year reported by his company. On a 365-day basis, that means that if he earns the same this year, he'll meet his 2014 obligation to Social Security by about 8 a.m. Thursday. To be more precise, however, let's note that a bit more than half his annual compensation was deferred, leaving only $15.9 million in salary, bonus and stock-based pay; at that level he'll be exempt from any further Social Security payroll tax by about noon Friday. (L.A.Times)
The reason of course that CEOs like Cote push cuts and fight against an increase in the S.S. payroll tax is that they would never even notice the cuts. The tax they'd notice. So congratulations to the 1%. Today is your Social Security Payroll Tax Freedom Day. Time to celebrate! Yay!