Tuesday, August 18, 2009

Pay of Top Earners Erodes Social Security

From everyone to whom much has been given, much will be required; and from the one to whom much has been entrusted, even more will be demanded.
Luke 12:48

Apparently, when it comes to Social Security taxes, the reverse is true. Less is required of those who have more.

An article by Ellen Schultz in the Wall Street Journal points to a largely unnoticed result of the widening wealth gap in the United States. The fact that a lower total percentage of all wages are subject to Social Security taxes has reduced the amount in the fund.

In 2002 executive pay accounted for 28% of all wages. By 2007 that amount had risen to 33% of the total. This means that a lower percentage of total wages are subject to Social Security.

We often hear commentators telling us that Social Security is going bankrupt. We seldom hear them pointing the finger, as the Wall Street Journal does, at executive compensation. Simply put, the wealthiest people are not paying their fair share.

In 1982, 90% of all wages were subject to Social Security. That amount has now shrunk to 83%. This shift results in lost revenue of $115 billion per year. If the Social Security maximum were adjusted to be comparable to 1982 levels, the fund would be solvent for the next 75 years.

You can read the full article by following this link:



  1. Numbers can be playful or deceptive. SS benefits are caculated individually. What you put in determines what you can take out. There is a cap for what one can take out so therefore a cap exists for a maximum contribution. If you want the total taxable wages to be 90%, then the max contribution must increase to accomidate and the max payout must do so in kind.

    It seems the system is broken and Bush's solution may be the best course. Put it all on red and if you win, it is fixed. If you loose, it is a quick parting.

  2. I'm going to side with the Wall Street Journal on this one.

    Yes, benefits are calculated individually. But there is not a direct relationship between the money a person puts in and the money that he or she gets out. Making 90% of wages taxable for Social Security would not require that the money collected be used exclusively for those at the top end of the wage scale. Collection and distribution are not directly related. The additional money coule be used to make the fund solvent, not to give more benefits to those who already get the most.