6 ms·

The article ignores the fact that while the wealthy may be living longer, they also disproportionately fund social security. They may be receiving benefits for

• NoGravitas 9y ago
  No, they really don't disproportionately fund Social Security. Quite the opposite, in fact. You only pay Social Security payroll taxes on the first $127,200 of your annual income. So if you make $250k, your payroll tax rate is effectively half that of someone making 125k (numbers rounded off here, don't nitpick). Details here: http://thehill.com/blogs/congress-blog/economy-budget/204996-scrapping-the-social-security-payroll-tax-cap http://thehill.com/blogs/congress-blog/economy-budget/204996... and https://en.wikipedia.org/wiki/Social_Security_Wage_Base https://en.wikipedia.org/wiki/Social_Security_Wage_Base
  • maxerickson 9y ago
    $125000 is above the 90th percentile for individual income. People making that are doing pretty well in relative terms. I guess the cutoff for 'wealthy' is often higher than that though.
  • gregable 9y ago
    That also misses the point since benefits are directly tied to lifetime contributions, not earnings. Double the cutoff and you would double someone's contributions. The feature that does make social security progressive it's the diminishing contribution to benefit ratio a lifetime contributions increase.
  • loeg 9y ago
    Single income of $127,000 is 93rd percentile in the US. Given that, sure, the top 7% or 1% or the 0.1% don't fund SS proportionately (but they also do not receive higher benefits than the people at exactly $127,000). The article isn't really talking about the 0.1% or 1%, though, which is a tiny portion of SS payouts, but instead the top 20% or 40% (top quintiles).
  • mdorazio 9y ago
    You realize the median income in the US is about $52k, right? For an entire household. The SS tax cutoff is more than double that for an individual earner. So yes, they really do disproportionately fund Social Security, even with the cap. They just don't fund it in direct proportion to total earnings.
  • khuey 9y ago
    The benefits received compared to income taxed slopes downward pretty dramatically within the range of income that is subject to FICA taxation. The Primary Insurance Amount is currently 90% of the first $885/mo, 32% of the next $4451/mo, and 15% of the amount above that. So Social Security will replace most of a low-income person's income during retirement (and it's also tax free for those people) but will replace a much smaller proportion of a higher income person's income despite the latter having paid more taxes to fund SSI.
    • zacharytelschow 9y ago
      This is what people don't understand. Though the contributions may happen at a flat rate, the payouts are highly progressive. While the rich may get out more in absolute terms, on a per month basis it isn't much more and they still will have a worse ROI on SS than the poor will.
  • jeffdavis 9y ago
    Let's say you have 3 people: one who makes 50K, another 125K, and a third who makes 250K. Let's also assume SS tax of 7% on first $125K. The first pays $3500 per year in SS tax, the second pays $8750, and the third $8750. But each one gets the same SS benefit (assuming same number of working quarters and lifespan). You are right about tax rates, but those rates don't affect the benefit. The article makes the point that lifespans are not equal, which tilts the SS program in the regressive direction. But (unless I misread the numbers), SS is still a progressive system overall.
    • loeg 9y ago
      Someone earning $50k does not get the same annual SS benefit as someone earning $125k. Unless you are adjusting for expected lifespan?
      • jeffdavis 9y ago
        You're right, though it does not appear to be linear. I could swear that it didn't work that way before -- did somethibg change?
        • loeg 9y ago
          I'm not aware of any previous model, although I've only been paying attention to Social Security for a couple years.
• rebeccaskinner 9y ago
  The cap on social security contributions is fairly low. After $127,000 you stop contributing to the social security. That means that plenty of middle and upper middle class families are contributing exactly as much as the rich, while probably not having access to as many of the things that improve life expectancy.
  • loeg 9y ago
    $127,000 individual income is 93% percentile. I don't think "plenty of middle and upper middle class families" is a good description of the top 7% of US earners. Social security is taxed on individual income, so you shouldn't look at this like a household income figure.
    • dragonwriter 9y ago
      > $127,000 individual income is 93% percentile. I don't think "plenty of middle and upper middle class families" is a good description of the top 7% of US earners. If you use the traditional capitalist-economy "middle class" (the petit bourgeoisie who live primarily by applying their own labor to their own capital, rather than doing wage-labor for a capitalist or being a capitalist that rents labor rather than supplying it), I actually don't think that's unreasonable. If you use "middle class" to mean the middle income segment of the working class, then, sure, it seems weird.
  • dragonwriter 9y ago
    This also easy to address; include capital income and not just labor income, remove the income (and benefit) caps, and add additional bend points to the benefit calculation formula. This secures the fiscal health of the program, drives it back in the direction of progressivity across the scale, and provides people who choose active personal capital management (either for a short time returning to wage labor, or permanently) but achieve merely a modest living at it the same security for retirement as those who chose wage-labor.
    • rebeccaskinner 9y ago