Truth or Consequences for Social Security
Forget Privatization, What about Taxation?
By Edward Shanahan
Given the hot rhetoric swirling around the issue of Social Security, it is impossible for the average citizen, either wage earner or retiree, to evaluate the wildly conflicting views of the program.
Is the system on the verge of imminent collapse as its critics warn or is the so-called crisis a manufactured one as supporters maintain?
Either Social Security is “headed toward an iceberg” as some claim, or the program’s trust funds as of now will be able to pay full benefits until 2042, without any changes.
In the end, who you believe and what position you are inclined to take depends on your political outlook and especially your confidence in the wisdom of “privatization” and greater dependence on individuals being able to evaluate and handle their own retirement needs through personal investment accounts.
I’m dubious about the magic of privatization, given the corporate scandals in the form of looted pension plans and the ever-inventive strategies that drug companies, insurance firms and bank credit card issuers dream up to exploit their customers in order to boost profits and fund lavish executive perquisites.
And speaking of perquisites, we should keep in mind the outrageous scale of the loot that legions of high rollers in our free-market economy pocket each year without a significant tax penalty.
I have in mind the army of CEOs who take home salary, bonuses, and questionable financial rewards in excess of $10 million a year, often exceeding $20-plus million annually. I’m thinking of the pitchers with a terrible ERA making $5 million a year, or other sports superstars who sign long-term contracts averaging $15 to $20 million a year stretching over a decade. Network TV anchors, like Peter Jennings, get paid $5 to $8 million a year, while others in the entertainment field are similarly rewarded.
The one common feature of this obscene pay schedule is that all of these multi-millionaires pay Social Security taxes on only $87,900 of their pay. That is the absolute ceiling. The same is true for doctors and lawyers, computer engineers and investment bankers. And these same mega-millionaires pay the same 6.2 percent tax on their artificially depressed salary that the hotel chambermaid, fireman or schoolteacher pays.
Why the ceiling? What’s wrong with those with the big bucks paying their fair share.I would wager that in many sectors of our economy, even the “selfless” area of politics and public service, that $87,900 is a pretty paltry salary. As result there is a rich lode of Social Security tax out there still to be mined.
Let’s capture that before handing over our savings and future to Wall Street movers and shakers.