Trillions in Taxes Dodged by Ultra-Rich Could Fund the Social Security Trust Fund
Without a doubt, there are simpler ways to resolve the funding of Social Security going beyond 2035. Bruce Webb, Dale Coberly, and Angry Bear have discussed the topic enough times. They have also been verbally attacked by others for suggesting the Northwest Plan is a way to secure Social Security up till 2100 or close to it.
Social Security belongs to the citizens, the people due to the way it is funded. There is no reason it can not continue to be funded in such a manner with miniscule adjustments in withholding. I would add to it an increase in the limit of taxable income so as to account for increasing incomes and inflation. This seems to fall upon the deaf ears of those representing us and those who can not see the logic of a slight adjustment. It is not difficult math.
Also the increasing of the age limit from 65 is and has been detrimental to those who have been exposed to physical labor over the years. Something our Representatives, Senators, and other elected government officials for a lifetime have not experienced more than just weekends volunteering their help in the hope of capturing a news clip. The soft hands which have never seen a blister or a callus in our society are intent on deciding what is enough and when Social Security can be taken, when they do not have to worry about the next day of work and live on Social Security monthly payments in retirement.
Another solution to the Social Security short fall by a good person.
Wyden Says Trillions in Taxes Dodged by Ultra-Rich Could Fund Social Security Until 2100
The Democratic chair of the Senate Finance Committee said during a hearing Wednesday that instead of tossing Social Security’s sacred guarantee “in the trash” by cutting benefits, lawmakers should crack down on mega-rich tax dodgers as a way to keep the New Deal program fully solvent for decades to come. Sen. Ron Wyden (D-Ore.) . . .
“The ultra-wealthy are avoiding nearly $2 trillion in taxes every 10 years. That is enough to keep Social Security whole till the end of this century.” Adding . . .
“That’s where we ought to go to start making progress.”
The senator’s remarks came during a hearing titled “Social Security Forever: Delivering Benefits and Protecting Retirement Security,” which featured testimony from Social Security Administration Commissioner Martin O’Malley and several expert witnesses.
Sen. Sheldon Whitehouse (D-R.I.), who presided over the hearing, used his opening remarks to blast GOP proposals to raise the retirement age, a change he said would “especially hurt low-income retirees.”
Whitehouse, the chair of the Senate Budget Committee, acknowledged that some Republicans have pushed back on the notion that the GOP wants to cut Social Security benefits. But if Social Security benefit cuts “really are off the table,” the senator said, “that leaves only one other option to prevent insolvency: raise revenue.”
“There is no third option. And that means it’s time to get to work identifying smart, fair ways to raise revenue, fund the Social Security Trust Fund, and preserve and protect benefits,” Whitehouse continued. “Fortunately, there are solutions that would both extend Social Security solvency indefinitely with zero benefit cuts and make our tax system fairer, like my Medicare and Social Security Fair Share Act.”
At today’s @SenateBudget hearing, @SenWhitehouse slams Republican plans to slash $1.5 trillion from Social Security.
Whitehouse plans to strengthen Social Security by requiring the wealthy to pay their fair share! pic.twitter.com/nWRJt3hUWp
— Social Security Works (@SSWorks) September 11, 2024
Wednesday’s hearing came in the heat of a presidential race in which Social Security has featured prominently, with Democrats warning that GOP nominee Donald Trump would push for deep benefit cuts if he’s elected to another White House term.
During Tuesday night’s debate, Democratic nominee Kamala Harris made the only mention of Social Security, vowing to protect the program that lifted 28 million people out of poverty last year.
Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare, said in a statement following the debate that while Harris reinforced “her commitment to Social Security and Medicare,” Trump “was mum on the topic.”
“At least when Trump has nothing to say, he cannot compound his many conflicting and confusing statements about Social Security and Medicare—from calling Social Security a ‘Ponzi scheme’ to saying he’s ‘open’ to ‘cutting entitlements’ and proposing to eliminate some of the taxes that fund Social Security,” said Richtman. “Tonight’s debate underlines the fundamental reality that one candidate in this race will truly protect Social Security and Medicare—and that is Kamala Harris.”
According to the latest trustees’ report, Social Security is positioned to fully pay all benefits and administrative costs until 2035 and is 90% funded for the next quarter century.
Progressive lawmakers and advocacy groups have argued for years that the best way to ensure Social Security’s long-term solvency is clear: make the wealthy pay their fair share into the program. Due to the payroll tax cap, millionaires stopped contributing to Social Security just 60 days into 2024.
“Warren Buffett stops paying into Social Security 30 seconds into the new year,” O’Malley said during his testimony at Wednesday’s Senate hearing, “and the people that clean these buildings pay in all through their paychecks.”
I thought the proponents of the Northwest Plan argued that making the rich pay more into Social Security was the wrong way to go, and that raising the payroll tax was the best approach.
Correct.
Which is not to say the Ultra-Rich should not pay more taxes for other programs.
@Arne,
I agree. I believe, for example, that capital gains income should be taxed like regular income. Same with inherited money, from the first dollar.
Joel:
They did say such. I said increase the tax income higher to perhaos 300,000.
“I would add to it an increase in the limit of taxable income so as to account for increasing incomes and inflation.”
The taxable limit is increased each year by the Average Wage Increase. The percentage of wages under the limit has decreased because the distribution of wages has increased, not because of inflation. So what you want to say is that you would add an increase in the limit of taxable income to account for the increasing share of income going to the rich. And this is $168K in 2024, so not the Ultra-Rich.
The fact that Warren Buffet reaches the maximum tax so quickly does not change that he also has the same limit on his benefits as someone who takes all year to make $168K. He does not need a stronger retirement safety net, so why should he pay for a stronger retirement safety net.
Wyden and Whitehouse should pursue the tax dodgers, but should direct the increased revenue to other investments that benefit those making under $168K such as childcare, education, healthcare, and affordable housing.
“The mega-rich—taking advantage of our rigged tax code—have avoided paying Social Security taxes on most of their income, threatening the promise of Social Security for future generations,” said Senator Whitehouse.
Social Security is retirement insurance. Making the rich pay higher premiums because they have less need for that insurance is incongruous.
It makes sense that the rich should pay more because they are the prime beneficiaries of a pool of healthy, educated workers who aren’t distracted by long commutes expensive childcare payments. And of a pool of customers with money to spend.
@Arne,
Muchas gracias for “It makes sense that the rich should pay more because they are the prime beneficiaries of a pool of healthy, educated workers who aren’t distracted by long commutes expensive childcare payments. And of a pool of customers with money to spend.” Now you are thinking about economics like an economist which is sadly not redundant.
On another thread the plausibility of industrial policy was examined with no mention of how financialization has made industrial policy appear necessary despite that such would just be a matter of closing the barn door after the horses have escaped. Attempting to regulate that which we have been directly at cause is both frustrating and forlorn.
I have not been very active in blogs since Thoma retired. First there was keeping our home-life secure during Covid, then my wife died, then I had grief depression, and now I am engaged to a wonderful lady with a brand new right knee that has lead a long life even more tragic than mine. I have the greatest love of my life to care for now, so I must leave saving the world to others if that is at all possible after the turn of events we faced in 1968.
However, you and few others that I encountered in a prior decade give me some hope. I wonder how Owen Paine is doing these days? Take care and best of luck.
Arne:
Did not say this ” Making the rich pay higher premiums.” However I did suggest this:
Would this work? Partially, yes.
“In 1977, Congress raised the taxable maximum to a level that covered 90% of total national earnings. The proportion of workers earning more than the taxable maximum has remained around 6% since the 1980s; however, because income for those at the top of the earnings distribution has grown faster than average wages, the percentage of total national earnings above the taxable maximum has increased. In 2022, only 82% of total payroll was subject to Social Security taxes.”
Fix the issue . . .
Bipartisan Policy Center
This may not be a group we wish to get in bed with; however, the graph is accurate.
“BPC’s commission also proposed increasing the taxable maximum in equal amounts over four years to a level that would cover 86% of total national earnings. If implemented in 2024, this would increase the taxable maximum to $279,900 in 2028 (instead of $195,900 as currently projected). After that, the proposal would index annual increases to average wage growth plus 0.5 percentage points to help prevent the tax base from eroding over time.”
Bill,
My 11:15 comment acknowledges the facts in your chart.
My 11:38 comment quotes Senator Whitehouse not you, but raising the payroll tax IS increasing the premium paid for retirement insurance. It is true for the NW Plan and it is true for raising the cap. We need to raise the premium because the cost of insurance increases as people insist on living longer in retirement.
If there is room to acknowledge that richer people have gained more years than poorer, that should be addressed in the bend points used to calculate the Primary Insurance Amount rather than in the cap.
Arne:
I put the graph up to minimize the arguments. People appear to understand a picture rather than words. You are going to have to explain bend points . . .
I thought SS was a benefit to the person paying the SS tax throughout their working career? The larger a person’s earnings, the larger the tax, the larger the retirement benefit. And the SS wage base is raised each year, thus the tax increases each year, thus the projected retirement benefit increases each year. Two persons earning the exact SS wage base each year will receive the same benefit in retirement. If one of those persons actual income is larger than the SS wage base, they will not pay additional SS tax and they will not receive any additional SS retirement benefits. What’s so hard to understand about a defined benefit pension benefit?
The real issue is not the fact that the so-called “trust fund” is running out of money. The issue is what happened to the SS taxes when they are collected and remitted to the government? The SS taxes are immediately “borrowed” by the government and the $ go into the general fund and are replaced by “promises” (Treasury bills, notes and bonds) which cannot grow faster than inflation. So, it is the government’s fault that SS is becoming insolvent, not the taxpayer or the retiree. The working taxpayer has no voice in the matter, and his so-called “representatives” go on running $2 Trillion deficits and crying for more tax dollars from anyone anywhere to fund their stupidity.
@Max,
The trust fund money is lent to the government in special Treasuries. Those moneys will be returned to the Trust fund.
It’s just like a bank. When you deposit money in a bank, it doesn’t sit in a little drawer until you ask for it. It is lent out, with interest. Your bank gets some of the interest and you get some of it. When you need it, the bank will hand it over. Same with SS. Not stupid, just Capitalism 101. It’s the people who have trouble understanding this elementary system who are stupid.
Joel:
Hold up on Max until he explains what he intends to do as a so;ution.
Nominal Interest Rates on Special Issues
The rates have exceeded inflation for much of the last two decades. They match what other people choosing government bonds for the low risk are getting.
Arne:
Max has other ideas. Let him explain what they are before answering him.
Max:
You are speaking in generalities. If you do not have detail, I am going to delete your comment as being nonsensical.
I am sick about people crying about fairness. The law is the definition of what we believe as a society is fair. Using the term unfair and assigning it to a certain group of people (the 1%) is prejudicial. This is a base and crude attempt at class warfare. If you believe it is unfair, then the laws are unfair, not the people. The 1% are not criminals and they obey the law after all they have the most of lose. Dare I say it, contribute the most to our society. All should be presumed innocent until proven guilty even the Bidens. The comment the “ultra-wealthy are avoiding nearly $2 trillion in taxes” reminds me of Elizabeth Warren saying Elon Musk did not pay his fair share in taxes when he paid $12 billion in taxes in 2021. As a former tax professional, I can attest that there are favored behaviors in having corporations and real estate. Without these tax laws behaviors would change and there are a horde of adverse effects that will ripple through the economy. Witness the tax reform bill of 1986 on real estate. Actuarially, social security is broke. We should meet our obligations but scrap the system since it is unsustainable. Perhaps a national sales tax and Universal Basic Income based on a fixed percentage of a national sales tax is the cure. At least that is sustainable, self-regulating and apolitical.
As a democratic society we can determine the boundaries of wealth accumulation. Since 1980 the percentage of wealth owned by the top 1% has increased dramatically.
Wealth inequality in the United States – Wikipedia
According to this article, Federal Reserve data from 2021 shows that the top 1% held 31% of the country’s wealth. The bottom 50% held just under 3%.
I agree with you that the tax laws are unfair. If we are serious about a more “fair” wealth distribution, we need to look at a wealth tax. Liz Warren’s 2% tax is a good start.
Ultra-Millionaire Tax | Elizabeth Warren
Jim:
What is the topic of the post? It is not wealth or Elizabeth Warren.
SG:
Take two aspirin or Tylenol and get some sleep so you do not appear on Angry Bear in a sickly state.
We are talking about Social Security and paying into it via the Social Security tax, yes? Social Security is not broke. It operates in the same manner as the rest of the government does. With debits and credits. Print money when you need it and take money out of circulation when you have excess.
Just planning for the future as we see a need for more revenue to maintain Social Security. Stay on topic if you wish to hang around here.
I really do not give a damn for Elon Musk.
@strongGnu,
It has been long realized that the US has the fairest laws that money can buy starting with laws regarding campaign finance – so to speak.