FIXING SOCIAL SECURITY ... and other thoughts

A little over four years ago I wrote this op-ed article for the Bakersfield Californian. At the time the Bush administration was pushing hard to privatize Social Security. In layman terms "privatization" meant turning Social Security accounts - and their funds - over to Wall Street investment houses for them to invest. The argument at the time was that Wall Street understands finance and money better than government, and can be counted on to do the right thing. Ooops.

Among the points I made in the article was that Social Security wasn't in as much trouble as the scare-mongerers (i.e. the Bush administration & FOX News) were making it out to be. I also provided several solutions for fixing the system. Here they are:

1) Rescind Bush’s tax cuts for the rich. This would add approximately $1.8 trillion to government coffers over the next ten years.

2) Raise the cap on payroll taxes.

3) Raise the eligibility requirements, or reduce social security cost of living increases (COLAs) by one-half percent per year.

Of these, because of this Wall Street Journal article ("Pay of Top Earners Erodes Social Security"), the proposed remedy that sticks out today is #2. When I wrote the article in 2005 all income above $90,000 was exempt from the payroll tax. This meant that every dollar earned past $90,000 was not assessed a Social Security tax and that approximately 15% of all national income was released from the social security tax.

Today, every dollar earned past $106,800 is not taxed by the Social Security system.

This means that if you earn $1 million per year every dollar past $106,800 is not taxed by social security. Why is this important? Because the Wall Street Journal is reporting that the pay of wage earners who receive more than the Social Security wage base ($106,800) increased by 78%, or nearly $1 trillion, over the past decade. This means that nearly $1 trillion dollars in national income that could be taxed like your salary (or mine) is not taxed. The total ammount represents about 17% of national income that is exempt. Here's what the WSJ says about this:

Social Security Administration actuaries estimate removing the earnings ceiling could eliminate the trust fund's deficit altogether for the next 75 years, or nearly eliminate it if credit toward benefits was provided for the additional taxable earnings.

Republicans and other "fiscal conservatives" are, of course, opposed to the idea leveling the social security tax playing field. Wall Street bankers and their politically-connected patrons, after all, have earned every bailout dollar that they've received. How dare we threaten to tax their bailout-escorted riches?

And, besides, it's not like our nation needs the money. We can depend on the Chinese and the Saudis forever, can't we? (So much for Country First.)

At the end of the day, the Social Security tax is a regressive tax that affects the working poor and America's Middle Class disproportionately. That we allow bonus-drenched Wall Street bankers and their minions to continue feeding at the trough of bailouts and favorable legislation - without feeling the taxman's pinch like you and I - is a travesty.

- Mark