A number of years ago, I was at a meeting in Washington, with a group of lawyers and lobbyists. We were discussing economic issues and the talk turned to Social Security. One well-shoed lawyer suggested we solve our problems by eliminating the cap on Social Security taxes.
The way she saw it, at summer’s end, when her salary reached the cap – around $100,000 at that time – and Social Security taxes were no longer deducted, she “got a raise,” which meant that she had extra cash for new shoes and Christmas gifts. And, she pointed out that she didn’t really need new shoes.
My mind turned to my grandmother who lived on her fixed Social Security payment. She would buy a pair of Keds tennis shoes, take the very best care of them, wiping the dirt off every evening when she came in and washing them so they would look smart. She made sure her shoes lasted as long as she could because she lived on a fixed income. She didn’t have extra money for new shoes.
This, in a nutshell, is the crux of the debate. We have a social insurance program that every worker pays into to help them afford basics in retirement, if they become disabled, or to provide income to dependent survivors. About two-thirds of elderly beneficiaries rely on Social Security for over half of their total income and nearly one-quarter rely exclusively on their monthly benefit. This money is then spent in their communities, on their food and housing, and for their health needs, along with little extras for grandchildren and loved ones.
But, we don’t collect taxes to pay for this program on earnings above $113,700. Only about one-in-20 workers hit this earnings cap, but according to the Congressional Budget Office, if we taxed their earnings above the cap, this alone would close the long-term gap in the Social Security trust fund. At a time when incomes are stagnant and middle class families need the economic security that Social Security provides, our national discussion should include lifting the cap on earnings.
The reality is that the aged and infirm need income and we have a well-functioning system to tax workers to provide income when they leave the labor force. Those who earn more can pay a bit more. We can either pay for a system that provides decent benefits through taxes, or we are each on our own.
Lifting the cap for those who can best afford to pay is a logical step, especially since people like my colleague say they can afford it. If we do not, you and I and every other working person will have to worry that much more about the well being of our loved ones because we decided that the political cost of lifting the cap on earnings was higher than the well-being of people who worked a lifetime. When my grandmother — or yours—needs new shoes, someone will have to pay for them.