What if we told you that starting this week, the top 1% of wage earners in America get a boost to their paychecks, but yours would remain the same? Sounds unfair, doesn't it?
In essence, that's what's happening, and for 99% of us, it's a raw deal.
This week, the top 1% will stop paying social security tax -- if they hadn't stopped already. Social Security's guaranteed benefits are an integral part of ensuring retirement security for all, after a lifetime of hard work and contributions. But our Social Security tax system has a cap: when workers reach $110,100 in earnings for the year, they no longer get taxed. This means they stop contributing to Social Security while the majority of us continue throughout the year.
For example, an employee who makes $220,200 -- twice the cap -- will stop paying Social Security taxes halfway through the year. An employee who makes 12 times the cap stops paying within the first month. For the last of the top 1% of wage earners, that stop date is now.
On top of the fact that the Social Security tax doesn't apply to earnings over $110,000, it also doesn't apply to investment income and capital gains -- popular sources of income for America's wealthiest. This means that those with the highest incomes effectively end up paying a lower Social Security tax as a percentage of their overall income, even though they may be eligible for higher benefits when they retire. Take for example Mitt Romney, who paid just 0.1% of his income toward Social Security last year. Most of us paid at least 4.2%, and prior to the payroll tax holiday, which has been extended through 2012, were paying 6.2% toward Social Security.
As private employers continue to eliminate pension plans and cut retirement contributions of all types, Social Security is more important than ever before. For millions of low-wage workers who pay into the system year-round, Social Security benefits are less than $1200 per month, and this is often their primary source of retirement income.
As a basic foundation of many people's retirement, the program works and has helped protect more than 20 million Americans from poverty. But Social Security benefits are not high enough to provide a secure retirement for all Americans.
So what's the solution? According to Mitt, the answer is to cut benefits and raise the retirement age. Once again, his 'solutions' would only hurt the average American worker more. Romney has earned enough money in his lifetime that he probably has few worries about retirement; the rest of us aren't so fortunate.
A guaranteed way to fix the imbalance in Social Security's formula is to simply eliminate the cap, so that all workers pay the same percentage of their overall income into the Social Security Trust Fund.
"Do that, and you have solved the problem," says New York Times columnist Gail Collins.
"[...] the main answer is that cap, anybody who refuses to even discuss the payroll tax cap is not serious about fixing Social Security. Romney has already ruled out the payroll tax cap."
By expanding the Social Security tax base so that all Americans pay the same rate on their income, we would generate more than enough revenue to raise benefit levels, expand access to Social Security and fill its long-term funding gap.
If the 1% paid their fair share of Social Security taxes, we could make Social Security solvent for the rest of the 21st century and improve benefits for our most vulnerable seniors.
Let's strengthen Social Security and protect the American dream of retiring with dignity.
Want to learn more?
Click here to view and download Social Security and the 1%, a 2-page report explaining the Social Security tax cap.
Check out what SEIU members, community groups and petition signers had to say about the unfair tax cap.