GUEST OP-ED: On Social Security

There is little positive to take away from the recent, nearcataclysmic losses suffered on Wall Street. Maybe, watching our401ks and retirement funds plummet, we can at least take somesolace knowing that America’s retirement fund, Social Security,thankfully was not privatized, and is not at all invested in themarket.

Recently a lot has been made about the fact that Social Securityis broke and will not be able to provide the full benefitsretirees have paid into somewhere around the year 2037. And it’strue .But that doesn’t mean there are no common sense solutions onhow to strengthen Social Security to ensure its solvency fordecades to come.

Social Security was created during the depression as a form ofinsurance. It made certain that Americans, as they got older, wouldhave at least some income. Workers would pay a portion of theirwages into a system and then, when they turned a certain age, 65nowadays, they gained the right to collect guaranteed benefitsbased on how much they had paid in.

That promise has been fulfilled for the past 75 years and cancontinue to be until 2037, according to the 2010 Trustees’ report.As it currently stands, after 2037 Social Security recipients willnot be able to collect full guaranteed benefits due to the factthat there will be more money going out to pay beneficiaries thancoming in from the workforce.

As of this year, Social Security payroll withholdings are about 6.2percent of an individual’s earnings with an additional employermatch. Any earnings above $106,800 are not subject to tax.

So, for example, a person with a gross income of $10,000 will have$620.00 withheld as Social Security tax from his or her check, withthe employer paying a matching $620.00.

A person with $110,000 of gross income in 2010 pays Social Securitytax of $6,621.60, resulting in an effective rate of approximatelysix percent, which is lower than the 6.2 percent rate paid by thosewho earn less than $106,800.

An individual earning $1million a year in wages will pay the same$6,621.60 in Social Security tax (resulting in an effective taxrate of approximately 0.66 percent of gross income). An individualearning $100 million a year in wages will pay the same $6,621.60 inSocial Security tax (resulting in an effective tax rate ofapproximately 0.0066 percent of gross income). How, in any world,is that fair?

Those earning the most money end up paying a substantially lowerpercentage. To put it in a much simpler way, billionaires likeDonald Trump pay the exact same amount in Social Securitywithholdings as a police officer who makes $110,000 a year. And wewonder why the system is broken.

Part of Social Security’s long-term financial shortfall stems fromthe fact that not all wages and salaries are subject to SocialSecurity taxation. As a consequence, as the rich get richer, andtheir incomes move beyond the current $106,800 earnings cap, theydo not pay a penny more.

Lawmakers need to focus on restoring fiscal fairness andresponsibility, which would also improve Social Security’slong-term stability. The cap should be eliminated. All workingAmericans should pay the same percent on their earnings towardsSocial Security.

This solution would mean that those taxpayers who are in the bestposition to help save Social Security would pay only their fairshare, the same share that you and I are already paying, and indoing so would guarantee for this vital program a long and stablefuture.

Jonathan Yedin is the executive director of the BrooklynDemocratic Party.