Ever since a few weeks ago, when President Obama joined with Bernie Sanders, Hillary Clinton, Elizabeth Warren, Social Security Works and a growing league of policy makers and policy experts calling to expand Social Security, opponents have been pushing back as hard as they can; they want to keep Social Security benefits low; many want to “means test” it and turn it into a welfare program. Make no mistake, expanding Social Security promotes retirement security; means testing Social Security puts it at risk.
Social Security, like Medicare, are earned benefits, not charity programs. They allocate funds equitably, with most benefits going to lower income individuals. The vast majority of Social Security benefits (75 percent) go to individuals with annual incomes of less than $20,000. And, more than 90 percent of benefits go to people with annual incomes under $50,000.
Very little Social Security funding goes to the wealthiest Americans. Dean Baker and Hye Jin Rho at the Center for Economic and Policy Research calculated that just 2.3 percent of Social Security benefits go to individuals with incomes of $100,000 and up, and only 0.6 percent of benefits go to individuals with incomes of $200,000 and up.
Reducing or eliminating Social Security benefits for people of wealthier means–“means testing” Social Security–may sound reasonable in theory, but it would save almost no money if it applied only to the wealthiest Americans. Because so few retirees earn more than $50,000 a year (half have incomes under $24,150), means testing benefits would only create real savings if people earning $30,000 a year saw their benefits fall. And, that would jeopardize retirement security for middle-income earners.
Moreover, Social Security is an insurance program designed to benefit everyone who contributes in it, not a need-based program. As with life insurance, everyone paying in receives benefits, regardless of income. We don’t means test access to public schools because we want to benefit the collective, deliver opportunity to all. Similarly, we don’t means test Social Security because it is a public good that helps deliver financial security.
Social Security gains its strength from being inclusive and protecting everyone who pays in “against the hazards and vicissitudes of life,” as Franklin D. Roosevelt posited. A progressive tax system is a better way to ensure that everyone contributes their fair share, not means testing.
To generate larger Social Security reserves, it makes sense to lift the cap on Social Security contributions so that wealthier Americans pay into Social Security throughout the course of the year, as the overwhelming number of Americans already do, not to cut their benefits.
If opponents of Social Security expansion genuinely want the wealthiest Americans to benefit less from the government, why don’t they support lifting the cap on contributions into Social Security and/or having them contribute to Social Security after they pass and before their heirs benefit from their estate tax exemption? And, why aren’t they calling for means-testing 401(K) contributions or the large housing subsidy we offer homeowners through tax deductions?
To read more about why means testing is a bad idea, click here. Click here to read Dean Baker’s latest piece on Robert Samuelson’s attack on Social Security.
Here’s more from Just Care:
- Support Social Security to reduce risk of recession: Larry Summers
- Trump now supports Social Security and Medicare cuts
- Claiming Social Security benefits early disproportionately hurts people with lower incomes
- New data reveals that higher Social Security income helps the memory and mental functioning of older adults
- Financial transaction tax a progressive way to pay for Medicare and Social Security expansion