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Social Security is not a private opt-in or -out choice like the decision to fund an IRA. Instead, for decades, it has involved employees and employers providing secure retirement benefits generation after generation. The money workers pay into Social Security today funds benefits for today's retirees, and today's retirees did the same during their working lives for those who drew Social Security payments decades ago. The importance of this function of Social Security was well understood until recently.
Today, some people believe that Social Security will not be there for them even though there are equitable solutions that will fully fund Social Security for the foreseeable future. In planning for the future of Social Security, we need to recognize that it is no small thing to break our long-standing intergenerational obligation to ensure that Social Security retains its role in protecting its recipients.
One obvious solution - or it would be an obvious solution if most people were aware of it - is to raise the Social Security cap or eliminate it completely. The current cap is $113,700. People who earn less than the cap pay FICA (Federal Insurance Contributions Act) taxes on every dollar in wages they earn. People who earn more than the cap pay FICA - the money we pay to fund Social Security - on every dollar they earn until they hit the cap. All dollars above the cap are FICA tax-free for them.
The result is a highly regressive tax that makes the poor pay a higher percentage of their income than those who are wealthy. As a result, a person earning twice the cap - $227,400 - will pay half the rate paid by people earning less than $113,700 a year for Social Security, Another consequence of the cap is that Social Security is not as well funded as it could be.
The Social Security cap on payments reflects a philosophy of "From those to whom much has been given, little or nothing is expected." Eliminating the cap and taxing everyone at the same rate, or raising the cap, would be a good fit with Social Security's tradition of collective and intergenerational obligations.
The Social in Social Security
Most of us think of Social Security only as a program for retirees. However, that is only one of its roles. It provides important financial support for a much wider group of people.
Social Security's full name is the Old Age, Survivors, and Disability Insurance (OASDI ). OASDI provides benefits that make our society more decent and humane. In addition to providing financial support to older Americans who have worked and paid their payroll taxes, OASDI also provides support to the survivors of a worker who has died, including minor children who have lost a parent and to those who are too disabled to work.
To keep faith with all these members of our community, we need a robust program that keeps faith with our forebears and that meets our intergenerational obligations. Social Security provides millions of us with true security. FICA - the money we pay to fund Social Security - provides the basis for all of us to live a decent, dignified life within prosperous communities. It is social in the sense that it provides broad support for a good society by keeping people out of poverty.
Social Security is not a limited, confined, or private matter, a mere tax, or a handout. Instead, OASDI benefits track the biblical injunction - repeated many times - that we are obligated to care for the widow, the orphan and the poor.
[Ellen Dannin is Fannie Weiss distinguished faculty scholar and professor of law at Penn State Dickinson School of Law and author of "Taking Back the Workers' Law - How to Fight the Assault on Labor Rights."]
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