How to Fix the Inequality Loophole That Costs Social Security Trillions

by | Mar 13, 2023 | Progress & Solutions

President Roosevelt signing Social Security Act, 14 August 1935. Image: Library of Congress, Wiki Commons

How to Fix the Inequality Loophole That Costs Social Security Trillions

by | Mar 13, 2023 | Progress & Solutions

President Roosevelt signing Social Security Act, 14 August 1935. Image: Library of Congress, Wiki Commons

Polls show that a simple solution fixing Social Security has widespread support, including 76 percent of all voters and 65 percent of Republican voters. Unfortunately, Republicans are not listening to their voters.

Is your salary less than $160,200?

If so, you’re among the 94 percent of American workers who pay into Social Security all year long. Thanks to a loophole that exclusively benefits the affluent, income above that amount simply isn’t taxed for Social Security.

That means someone like Tucker Carlson, who makes a reported $8 million a year, stopped contributing to Social Security on January 8. Joe Rogan, who reportedly makes $4 million a month, stopped contributing on January 2.

That’s how quickly these high rollers cleared that $160,200 benchmark. But this isn’t even the worst of it.

Many billionaires receive all of their money in the form of bonuses and stock options. Elon Musk is the highest paid CEO in the world, but because none of it is “wage income,” he doesn’t pay a single penny into Social Security.

Right-wing politicians and cable news pundits frequently say that we “can’t afford” Social Security. Their solution? Cut benefits for working people who’ve paid into the program for our entire lives.

They never suggest that we simply require the wealthiest people in America to pay into Social Security all year long, just like the rest of us. If we taxed them like we tax everyone else, we could afford not just to protect our benefits, but expand them.

The Social Security Expansion Act would do just that. This bill would require the wealthy to contribute into Social Security on all their income over $250,000—including investment income. And it would use the additional revenue to increase Social Security benefits and keep the program strong.

Another piece of legislation, Social Security 2100: A Sacred Trust, would also lift the cap on Social Security contributions and use the revenue to expand benefits. It had the support of about 90 percent of House Democrats in the last Congress.

The movement to finally require the wealthy to pay into Social Security all year long isn’t limited to Congress. President Joe Biden campaigned on lifting the cap and using the revenue for targeted benefit expansions.

Polling shows that the idea has widespread support among the public, including 76 percent of all voters and 65 percent of Republican voters. Unfortunately, Republican politicians are not listening to their voters.

The Republican Study Committee, a group that counts 156 House Republicans as members, released a budget last year that would make massive cuts to Social Security benefits, including raising the full retirement age to 70. It doesn’t raise one dime of additional revenue from the wealthy.

These politicians are focused on protecting their wealthy donors, who pay less into Social Security than ever. The Economic Policy Institute (EPI) recently found that as inequality increases, a record share of all earnings are above the $160,200 cap on Social Security contributions.

In 1983, the last time Congress made major reforms to Social Security, they set the cap at a level that covered 90 percent of all wage income, leaving only 10 percent above the cap. By 2021, the percentage of income above that cap had nearly doubled. And that doesn’t even include investment income which, as in Musk’s case, accounts for the bulk of the income of the wealthiest.

EPI estimates that rising inequality has cost the Social Security Trust Fund $1.4 trillion. That’s a massive windfall for the wealthy—and a massive loss for our Social Security system and the millions of Americans who rely on it.

Congress has the power to end this injustice. All it would take is Republican politicians listening to their voters and joining with Democrats to require the wealthy to pay into Social Security on all of their income, just like the rest of us do.

Republished with permission from OtherWords, by Linda Benesch

OtherWords — Institute for Policy Studies

OtherWords — Institute for Policy Studies

OtherWords is a free editorial service published by the Institute for Policy Studies. Each week, we publish a package of op-eds and columns, plus an original cartoon, and distribute them to readers, editors, and publishers through our website and newsletter. Each year, hundreds of newspapers and websites reaching millions of readers use this work.

Help Support Factkeepers!

Follow Us

Popular Articles

Subscribe for Updates!

Subscribe for Updates!

Join our mailing list to receive the latest news and updates from our team.

You have Successfully Subscribed!

Share This