Social Security Cap Debate and Poll
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Benefits paid to today's retirees come from payments made by today's workers. These payments are in the form of a payroll tax based on incomes up to a certain level. In 1937 the level was 3,000 dollars; 50 years later it had been raised to 42,000 dollars. The 1937 payroll tax was 1 percent for employers and employees. In 1987 the tax had risen to 5.7 percent for each. Currently, Social Security FICA taxes are levied on wages and self-employment income up to $68,400.
FACT 2 3-30-99
The Social Security trustees reaffirmed that Social Security does not face a near-term crisis. Payroll tax revenues currently exceed benefit payments and are resulting in the accumulation of a steadily growing surplus that will allow benefits to be paid in full for the next 35 years. In the long term, however, the system will face an imbalance.
Let's just get rid of the cap altogether and tax 100 percent of earnings. This proposal would indeed raise a lot of revenue roughly $70 billion in 1998, and enough over the long run, according to the Social Security Administration, to eliminate three-fifths of Social Security's trust-fund deficit.
EVEN IF YOU DIDN'T LOWER THE RATE It would STILL ONLY push back the system's insolvency date by six years.
IF THIS IS TRUE WE SHOULD REMOVE THE CAP NOW!
It is also important to remember that the social security is an extremely regressive tax. First, it is a tax only on wages, leaving other income sources, such as capital gains, interest, and other profits on investment, untaxed. Since wages represent a high proportion of the poor's income, a payroll tax will take a higher percentage of total income of the poor than of the wealthy. That effect is compounded because the amount of income subject to the payroll tax is capped.