New Castle News

John K. Manna

September 1, 2012

John K. Manna: Here’s one way to address Social Security’s woes

NEW CASTLE — Most government problems, despite what a lot of elected officials may want you to believe, are easy to solve.

Plus, many of them know what the solution is, but lack the will to do it.

One of those problems is how to save Social Security benefits for future generations. The problem has been languishing for several years, so it isn’t as if members of Congress and presidents haven’t had time to figure it out.

Of course, one of the obstacles in the way is whether to continue Social Security as it is now or to make modifications to the program. Those modifications include cutting benefits or allowing people to decide on their own how to invest some of their Social Security taxes.

A recent Associated Press-GfK poll showed 53 percent of adults preferred raising taxes rather than cutting benefits for future generations as a way to fix Social Security’s problems. That’s certainly not an overwhelming number, but a majority nonetheless.

Only 36 percent, on the other hand, said they would cut benefits instead of raising taxes.

Raising the retirement age is another option, but that may be an option of last resort. People may be living longer on average, but there are no guarantees that they will be able to hold on to a job up to the age they can collect full benefits.

If anyone is truly interested in retaining the program as it is, the fairest way to do that is to raise the Social Security wage base well above the current level of $110,100 or eliminate it entirely. That figure is the ceiling for Social Security taxes to be deducted.

Although the wage base is increased periodically with inflation, it discriminates against people with lower incomes and those in the middle class who both Republicans and Democrats say they care so much about.

A person with a $60,000 salary, for example, will pay $3,720 in Social Security taxes this year. But a person with a $150,000 salary will pay $6,826 in taxes.

The higher salaried individual’s taxes represent only 4.6 percent of the person’s wages. That person will pay taxes on the first $110,100, but nothing on the remaining $39,900.

In sharp contrast, the individual with the $60,000 salary will pay 6.2 percent, which is the current Social Security tax rate.

For anyone who may say raising or eliminating the wage base would place an unfair burden on those with higher salaries, my response is that people with lower salaries are already bearing an unfair burden.

 

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