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Social Security would have all the money it needs were there greater income equality

Social Security would have all the money it needs were there greater income equality in the United States.  Put differently, the majority of working people have contributed less than expected to Social Security because their earnings have not grown as quickly as the highest earning Americans or as quickly as the federal government had projected. Had people’s wages increased more evenly, Social Security would be adequately funded.

When Social Security funding was being considered back in the late 1970s, there was not the same degree of income inequality as there is today. Wage increases were far more uniform across the workforce. So, it made sense that a cap on Social Security contributions would deliver adequate funding to Social Security.

But, since 1979, the top one percent of wage earners have seen a 138 percent growth in earnings as compared to a 15 percent growth for the bottom 90 percent. This inequality in earnings means less money has been contributed to Social Security than otherwise. Many more people than projected have been earning less than the cap, which is now $118,500.

Contributions to Social Security are uneven as a percentage of people’s incomes. All of the six percent of working people in the U.S. who earn more than $118,500 stop making Social Security contributions early in the calendar year.  The top 10,000 earners with annual incomes of $4 million can stop contributing in their first week of work (after earning $118,500) since they pay the same amount as people making $118,500.  Their contributions to Social Security as a portion of their income are small relative to the vast majority of workers, who contribute into Social Security throughout the year.

Eliminating the cap to correct for inequality in payments and simply requiring a Social Security contribution on all earnings as there is with the Medicare contribution would provide Social Security with the funding it needs for the next 75 years. 

For a more detailed explanation of how income inequality has left Social Security underfunded, you can read my recent article in The AtlanticClick here to learn more about why it’s time to build on Social Security’s successAnd, watch this Robert Reich video to learn why we can afford to expand Social Security.  Several organizations have joined forces to expand Social Security in 2016. To sign their petition, click here.

And, click here for, “How To Retire With Enough Money and How to Know What Enough is? “ my new book about how to plan for retirement (and generally manage your money). It is also a bit funny, short, and cheap.




  • …another way to would be to make Social Security a true “trust” rather than a treasury account. This would protect all funds from being used for “other government purposes” that are totally unrelated to retirement, survivor, and disabled worker benefits . Social Security is supposed to be an insurance programme for people who fit the above three cases, not a slush fund for other unrelated programmes. If there is a surplus, it should remain within the trust for the benefit of those who need it, not for balancing the budget just so a president can “save face”, or offsetting the cost of tax cuts for the privileged, or funding military actions overseas.

    This money is collected from you and and your employer(s) in the “Good Faith” that it will be there when you retire or are no longer able to work, not so some politician can use it for his or her pet programme.

    For example, In 1983 the Reagan Administration increased the Social Security tax, supposedly to build a fund (2.7$ Trillion) for when the boomer generation retired. Instead it used the surplus to cover it’s behind in an attempt to balance the budget after making sweeping tax cuts (which mostly benefited the wealthy class) and increased military expenditures. That money has yet to be paid back.

    This is nothing new as the programme was set up as a treasury fund in the guise of a trust on day one. As a treasury account, any surplus revenue generated goes into the general fund which then can be used for “any other government purpose”. This is what needs to change.

  • How about everyone who works for a living no matter their income pay into the trust. People whose salaries are over a certain amount can mostly opt out of SS. Correcting this would increase the amount SS collects and fully fund the program. It is the same formula the Sanders is proposing in order to provide single payer health coverage or Medicare for All. It would only amount to a few more dollars per payroll and relieve us the confusing and inadequate system we now have that only benefits the insurance companies.

  • When part of social security is subject to tax is the tax payment credited to Social Security or to general federal revenue?

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