Social Security Finances
Cal Berkeley professor Robert Reich claims that “the future of Social Security” is “jeopardized” because “the rich have gotten richer” and “more and more of their income has escaped the cap on the Social Security payroll tax.”
IN FACT, politicians enacted Social Security while promising that “the most you will ever pay” in taxes is “3 cents on each dollar you earn, up to $3,000 a year.” Adjusted for inflation, the maximum SS payroll tax is now 8.6 times that amount.
Despite repeated tax increases, Social Security is facing insolvency mainly because of a falling ratio of taxpayers to benefit recipients. This is primarily caused by (1) increases in life expectancy without comparable increases in the retirement age, (2) the higher birth rate of the baby boom generation compared to other generations, and (3) the increasing number of people receiving disability benefits.
