Anything But Secure - The Social Security Crisis

How ever you try to slice it, the current recipe for social security is a feast or famine proposition. Many factors have contributed to its shortfall.

In 1977 the social security wage cap was adjusted to cover 90% of earnings, and we haven't seen it modified since.  With all the lucrative technological and business advancements, providing huge earning potential for business founders and CEO’s alike, it gives one pause when you consider the impact of not accounting for the income growth in that time.  

One thing is clear; SocialSecurity Tax has not grown to account for the top 1 % income.  To assume these earners had their Social Security tax requirement paid in the first half-hour of 2020 isn't farfetched.  On the other end of the spectrum, only about 6% of all workers will reach the cap in 2019 of $137,700, leaving an estimated 94% of earners making less than the wage cap.  The effect of this leaves most Americans paying into Social Security at 12.4% per paycheck, all year long.  While the wealthy got wealthier, the average worker did not making things lopsided.

As our Baby Boomers age, those over 65 accounts for around 16% of the population.  The Boomers are the second most significant portion of the population behind their millennials.  With life expectancy increasing and birthrates falling, the mismatch between old and young has substantial impacts on our outdated tax equation.  We not only have a wage gap but an age gap too.

The insufficiency of our Social Security system and possible solutions can be found in several ways. Adjusting the wage gap to account for the increased life expectancy, low birthrates, and wage disparity would undoubtedly be an excellent place to start.

The Potential Power of a Payroll Tax Cut

Chris Christie, the governor of New Jersey, thinks he knows what will build up social security and encourage Americans to save for retirement- offering a payroll tax cut to any American who works past the age of 62.

The tax, which is at 12.4% requires workers to pay half themselves and puts the burden of the other half on their employers, but Christie hopes to do away with that for older workers.

His belief is that this proposed tax cut would give older workers an incentive to work longer. He also explains how he believes it would help Social Security as a whole by reducing the number of workers who start claiming it the moment they hit the age of 62.

On the flipside of the coin, he also hopes to encourage more young workers to enter into the workforce by getting rid of the payroll tax for workers under the age of 21.

While Governor Christie’s proposal has certainly garnered a lot of attention, both positive and negative, he actually isn’t the first to propose this type of tax cut. Senator Marco Rubio of Florida did the same thing, and, outside of the political spectrum, many economists and tax experts have also proposed the idea.

While it is obvious that many people have seen the potential benefits of this decision, others see problems with the idea. The biggest complaint among detractors is that the tax break would harm the reserves of the Social Security program. These people believe that, instead of eliminating the payroll tax for older and younger workers, the federal government should increase the maximum income that can be subjected to Social Security tax.

It is abundantly clear that there are all kinds of feelings and opinions surrounding these ideas, but what isn’t clear yet is what will happen in the future with regards to this matter. For now, only time will tell.

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