Posts Tagged ‘Social Security’


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Posted: 11 February 2015 in Uncategorized
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I’ll admit, I’ve considered many different consequences of growing inequality over the years but I hadn’t thought of this one: the effect on Social Security.

According to the Center for American Progress,

Rising income inequality poses a direct threat to Social Security’s financial health. By virtue of the capped payroll tax, Social Security’s funding is directly tied to the full wages that low- and middle-income workers earn—but not to the full wages that higher-earning workers receive. Upward redistribution of income in the United States has meant that income has shifted away from workers whose full earnings are taxed and toward high-income workers whose additional dollars are exempt. At the same time, low-income workers whose wages remain stagnant contribute less in payroll taxes than they would if their wages were rising, while their benefits rise faster than their payroll tax revenue due to the progressive structure of Social Security’s benefits formula.

Thus, a significant portion of the expected shortfall of Social Security funds would have been reduced if either workers’ wages had kept pace with productivity or if the earnings cap had been raised to cover 90 percent of taxable income.


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November 2, 2014 Quarantine

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