Pay of Top Earners Erodes Social Security

[question everything]

Source: WSJ

The nation's wealth gap is widening amid an uproar about lofty pay packages in the financial world. Executives and other highly compensated employees now receive more than one-third of all pay in the U.S., according to a Wall Street Journal analysis of Social Security Administration data -- without counting billions of dollars more in pay that remains off federal radar screens that measure wages and salaries. Highly paid employees received nearly $2.1 trillion of the $6.4 trillion in total U.S. pay in 2007, the latest figures available. The compensation numbers don't include incentive stock options, unexercised stock options, unvested restricted stock units and certain benefits.

The pay of employees who receive more than the Social Security wage base -- now $106,800 -- increased by 78%, or nearly $1 trillion, over the past decade, exceeding the 61% increase for other workers, according to the analysis. In the five years ending in 2007, earnings for American workers rose 24%, half the 48% gain for the top-paid. The result: The top-paid represent 33% of the total, up from 28% in 2002.

The growing portion of pay that exceeds the maximum amount subject to payroll taxes has contributed to the weakening of the Social Security trust fund. In May, the government said the Social Security fund would be exhausted in 2037, four years earlier than was predicted in 2008. The data suggest that the payroll tax ceiling hasn't kept up with the growth in executive pay. As executive pay has increased, the percentage of wages subject to payroll taxes has shrunk, to 83% from 90% in 1982. Compensation that isn't subject to the portion of payroll tax that funds old-age benefits now represents foregone revenue of $115 billion a year.

(snip)

Lifting the earnings ceiling could result in higher Social Security benefits payments to higher-income individuals, since benefits are based on a worker's highest 35 years of earnings. But the additional tax revenue would have decades to earn a return, thus offsetting the cost of the additional payments. Social Security Administration actuaries estimate removing the earnings ceiling could eliminate the trust fund's deficit altogether for the next 75 years, or nearly eliminate it if credit toward benefits was provided for the additional taxable earnings. Employers oppose changes that would increase their share of payroll tax. In addition, eliminating the ceiling would prevent employers from using a controversial but common technique, based on payroll taxes, to award additional benefits to executives who participate in rank-and-file pension and 401(k) plans.




Read more: http://online.wsj.com/article/SB124813343694466841.html

[sfwriter]

1. Apply Social Security to ALL pay and compensation...

Problem solved - fin - done and solvent until the end of time.

[geckosfeet]

3. Agreed.

[LiberalFighter]

4. Those that retire with executive pensions exceeding $100,000

should be excluded from Social Security benefits.

Just a starting point.

[Politicalboi]

7. Yup that's what I think too

Unless for some reason they lose everything, then it should resume.

[Thothmes]

8. If they paid the tax, they are entitled to the benefit.

SS is not a needs based program. A person pays into the system, A person gets something back from the system. See how fast SS folds if it becomes a needs based program.

[bemildred]

9. That is true, but we could change it.

Taxation has never been needs based program, and FICA is really just another tax.

[Thothmes]

10. Would have to change the SS laws

FICA is collected specifically for the SS program. Think of the great welfare reform program the Clintons signed onto in the 90s. That was a needs based program. Congress does not have any problems "reforming" needs based programs when they get into a cost saving mood. I prefer we raise the cap on income that FICA is applied to. I see this as better than turning SS into a needs based welfare program.

[question everything]

14. But if we change the system so that these are not separate line items

than we could turn it into as needed system.

After all, I pay income tax and a lot of it goes to program that I don't support. I think that if all tax rates are raised, no cap, and then we establish a minimum level of income for seniors, then we can pay them to the middle and lower class only.

[Statistical]

26. +1. SS has survived where dozens of need based programs got axed. Why?

It affects all Americans so all Americans pay at least moderate attention when someone is tinkering with their retirement.

[ruggerson]

11. if you pay into the system, you deserve the benefits when you are retired

[question everything]

13. I have suggested this before that payment should be on as need basis

also, that taxes should not be a separate line item. Just increase everyone's taxes - proportionally, many pay more in payroll tax than in income - and then pay benefits to the ones who really need it.

[SoCalDem]

25. or get less , like many oldsters who have to work, and then have their SS payments reduced

:(

[aquart]

12. A simple and sensible solution. Or...

We could just bring out the guillotine and go French.

[Libertas1776]

2. American Oligarchy

he we come!

[bemildred]

5. Apply FICA tax to "capital gains".

Treat all income the same, watch the trust fund fill up.

[Hannah Bell]

22. you mean more than the current 2 trillion dollar surplus? how much extra cash do you think the gov

needs - especially when it's MANDATED, by the terms of the original SS legislation, to borrow any surplus SS collections into the general fund in exchange for gov't securities?

People get pissed the gov't borrowed the SS surplus - then they argue for creating an even bigger surplus - WHICH WILL ALSO BE BORROWED.

I don't get it.

[damntexdem]

6. Eliminating, or even just substantially increasing the cap would make SS safe.

And could go a long way toward covering Medicare cost increases.

[Rex]

15. The ultra wealthy enjoy their lifestyles, thank you very much.

Back to work, drone.

[lexanman]

16. How about putting Social Security in a lockbox

with taking a penny from it for any other purpose a crime punishable by execution. Same with Medicare and Medicaid. Instead of money being siphoned for wars and bribes and kickbacks to financial criminals who operate in our marketplace.

[question everything]

17. This is what Gore suggested

though I doubt he would have followed thru.

It is nothing but a box full with IOUs

[Hannah Bell]

21. what *is* a lockbox?

[Hannah Bell]

20. Explain what a "lockbox" is. Specifically, if the federal government takes in surplus SS money,

more money than needed to pay out to current retirees, what is it supposed to do with it, in your estimation?

[AngryAmish]

28. A lockbox is a box, with a lock

You put things into them. Then, if one wishes, things can be taken out.

[Hannah Bell]

29. so the gov should collect money from workers & put it in a locked box?

not even drawing interest?

even though the money is above the sums needed to pay current retirees?

why? that = reduction of current purchasing power & economic contraction.

[AngryAmish]

31. Such matters are beyond the ken of my little mind

I'll just worry about supplying definitions.

[Statistical]

27. So let me get this straight.

In 2010 SS will collect $900B and pay out $600B in benefits so there is a $300B surplus coming in.

Instead of using that and the govt paying SS back with interest we should leave the money in one account....

at the same time borrow $300B to pay for programs in 2010 and give the interest to the Chinese.


The personal household analogy would be you have a checking account paying no interest with $1000 in it and you have a credit card with $100,000 balance and interest every month. However you "lock" your checking account to prevent yourself from paying your own debt.

Make sense. Chase would love that.

[Hannah Bell]

18. "the percentage of wages subject to payroll taxes has shrunk, to 83% from 90% in 1982."

SS has always been designed to cover ~90% of total wages, & is actuarily sound when it does. The cap is (supposed to be) lifted regularly to maintain that level of coverage.

If the cap hasn't been adjusted to the 90% standard as per SS regulations - why not?

To provoke crisis & bullshit crisis-mongering reports like this one?

Why aren't they reporting on WHO FUCKED UP? Why does the report pretend these things just happen accidentally?

[question everything]

19. Congress? Who is supposed to raise the limit?

Hey, Congress cannot even adjust the AMT to inflation. Obviously someone has to think about it and to take action.

[Hannah Bell]

23. Gee, the program & the legislation have only been in effect 70 years.

& for most of that time functioned very well.

If they haven't been raising the cap, guess what?

It's because they deliberately chose not to.

[question everything]

24. And why didn't they?

Bush's cronies?

[Hannah Bell]

30. I don't know. this is the first i've heard they weren't conforming. my first speculation

would be that the now 17-mo recession has knocked out a lot of income at the bottom increasing the concentration at the top, i.e. that it's a function of job loss.