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Millionaires pay into Social Security just a few weeks each year

Written by

Diane Archer

in

,

Wealthy Americans pay much less into Social Security as a proportion of their earned income than middle-income Americans. Indeed, millionaires contribute only a tiny fraction of their annual earned income to Social Security; they pay into Social Security just a few weeks a year. The Center for Economic and Policy Research has developed a calculator to show how relatively little wealthy people contribute.

People who make $1,000,000 a year stopped paying into Social Security on Valentine’s Day, February 14, 2016–just six weeks into the calendar year.  Only 11.9 percent of their annual income is subject to the Social Security tax. And, their effective Social Security tax rate is just 0.7 percent.

In sharp contrast, the overwhelming majority of people in the United States, make under the Social Security cap of $118,500 and contribute into Social Security throughout the entire year. The full amount of their income is subject to the Social Security tax. And, their effective tax rate is 6.2 percent.

If millionaires contributed the same proportion of their earned income to Social Security as people earning $118,500 and less, they would be paying $54,653 more than the $7,347 they currently pay.  And, it would be one way to strengthen and expand Social Security.

To check out the Center for Economic and Policy Research Social Security tax calculator, click here.

People with lower incomes don’t only pay a higher percent of their earned income into Social Security than wealthy people. If they claim Social Security benefits early, it disproportionately hurts them.  And, did you know that hundreds of thousands of people receiving Social Security benefits are still paying back student loans?

Here are three ways government could help promote retirement security in the U.S.

To learn how income inequality in America has meant less money for Social Security, read Teresa Ghilarducci’s post on Just Care here. And, Nancy Altman writes on Just Care about why it’s time for people receiving Social Security to get a raise here. 

 

Comments

One response to “Millionaires pay into Social Security just a few weeks each year”

  1. BC Shelby Avatar
    BC Shelby

    …the sad thing is these people benefited from tax cuts and breaks by the Reagan and two Bush Administrations which were funded/offset through use of surplus Social Security funds. So even though they pay little to nothing into the programme, they still have reaped rewards from it. Meanwhile working Americans who are retiring have to worry about a number of issues like how to make ends meet on a monthly basis with living costs continually on the rise, if their benefits are going to be reduced, or if the programme will be placed into the hands of speculators in Wall Street through privatisation.

    Where I live the average monthly benefit cheque will not even cover rent which has been allowed to get out of hand (the median rent in the city is over 1,500$ for a 1 BR unit). Low income and section 8 housing is filled with wait lists between 5 – 8 years, or closed “indefinitely” and there is little hope for construction new low income housing or expansion of the HUD subsidy as developers and politicians see no profit in it.

    With the disappearance of unions, pensions in the private sector are a pretty much thing of the past. unless you work for say the railroads or a huge company like Boeing. For those of us who do not and were unable to put away funds due to low, stagnant wages (in part due the loss of living wage manufacturing jobs many which were outsourced outside our borders) all we have is Social Security to look forward to.

    In it’s initial concept Social Security was meant to ensure retirees had a roof over their head food on the table and clothing on their backs. It no longer is able to adequately provide so as prices for everything have skyrocketed faster than the annual living cost adjustments to benefits. This year, there is to be no cost of living adjustment. Meanwhile, Congress continues to approve tax breaks, and maintains loopholes that allow the wealthy and corporations to amass larger fortunes, while the many of us worry from day to day if we will end up on the street. What is worse, they have the power to vote themselves a pay raise if they so wish on top of all the brib-…er…lobbyist payments and speaking fees they can receive.

    Trickle down was a flawed concept from the get go. The tide may have risen but many of this nation’s citizens were left with leaky boats. Thirty five years later, poverty has become worse, the average paycheque has declined, the value of what earns has decreased, living wage jobs have been replaced with low paying ones, healthcare and medication costs have risen to obscene levels, housing costs are rising to obscene levels, and the discrepancy in both wealth and income is growing wider with more people on the low instead of top end and little left in the middle.

    We are becoming a nation of the working and retired poor. Former President Kimmy Carter and Senator Bernie Sanders are correct, we are on the “fast track” to becoming an oligarchy. The Republican presidential candidates are all touting even more tax cuts for for corporations and the wealthy while in the same breath mention they would also gut programmes like Social Security (through ideas like increasing the minimum age, to privatisation, to outright slashing of benefits), Medicare, and SNAP (which many Social Security recipients depend on). I cannot believe that people don’t see this for what it is, a full scale assault on the poor of this nation for the benefit of the wealthy and corporate sector.

    These “beneficiaries” of funds collected for my generation’s retirement. The 1983 increase in Social Security taxes was supposed to make sure there were funds for us when we retired generating a fund of 2.7$ trillion. Instead the Reagan Administration used the surplus generated in an attempt to to balance the budget after his sweeping tax cuts (most of which benefited the wealthy) along with increased spending for the military, threatened to leave the economy with a huge deficit. That money has never been paid back, neither were the funds from the “trust” that past and future administrations used for other purposes.

    I have mentioned this before. We need real Social Security reform. Eliminating the cap is just one move in the right direction. Social Security also needs to become a true “protected” trust (it currently is what is known as a Treasury Account which requires any surplus funds to go into the General Fund which any agency or politician can use for whatever) from which no money can be used for purposes other than retirement, disability, and survivor benefits. We also need to call in the “IOUs” of past administrations which “borrowed” against the trust to offset the costs of their actions. If this were done, Social Security would have no issue with remaining solvent for a very very long time.

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