Have you ever heard a person say, “I am more likely to see a UFO than receive my social security benefits?”
Gov. John Kasich (R-Ohio) during a Republican presidential debate last year stated, “Now there are more 18-year-olds who believe they have a better chance of seeing a UFO than a Social Security check."
Clearly there is a perception amongst some Americans that receiving Social Security benefits are anything but a sure thing. Given some individual’s bleak outlook for the Social Security program; do the program’s fiscal projections match people’s anxiety?
Recently the 2017 Social Security Trustees Report was released, which outlines the financial solvency of the Trust Funds (Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI)) over a 75 year period. According to the Trustees report if Congress doesn’t take action, the trust funds will see a short fall in 2034, leaving enough funding for Social Security to pay about 77 percent of its obligations using only income tax revenue. Additionally, by 2092, the percentage of commitments Social Security will be able to meet would decrease slightly to 73 percent.
The financial projections for the Trustees Report provide concrete evidence for the long-term viability and success of Social Security. I think people of all political backgrounds can agree that a federal program that projects at worst to meet about 75 percent of its obligations until 2092 is not going broke! However, despite a promising future, Social Security projecting a 25 percent short fall for future commitments is still unacceptable. Consequently, what steps can Congress take to ensure that all retirees receive 100 percent of their earned benefits?
Politicians have proposed various policies to ensure the program can meet all of its obligations such as privatization, raising the age for eligibility and increasing the Social Security payroll tax cap. While all these ideas could potentially stave off a short fall, only increasing the cap on the payroll tax will guarantee seniors receive their earned benefits at the appropriate age. The other ideas will risk retirement income to stock market instability or force older Americans to work longer, which would be particularly unfair to seniors who work labor intensive jobs.
Social Security revenue is primarily derived from the Social Security payroll tax from workers and employers up to the annual limit ($127,000 in 2017). Therefore, every dollar someone earns over $127,000 in 2017 is not subject to tax. In 1977, the last time Congress adjusted the cap, the cap covered 90 percent of all wages. Unfortunately, between 1984 and 2015, the percentage of taxable earnings fell from 88.6 percent to 82.6 percent. Social Security could easily be more solvent by increasing the percentage of our country’s income subject to the tax. In February, the Social Security Administration (SSA) declared that taxing income above $250,000, accompanied by other modest changes could make the program solvent to 2078.
Millions of Americans rely on Social Security as their only source of income and the program every year helps keep fifteen million seniors out of poverty. While the achievements of Social Security cannot be disputed, more still needs to be done to safeguard the program’s continued success. Modest changes to the social security tax cap can ensure that every American believes that their earned benefits are a guarantee.
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