Social Security’s reserves are to be depleted by 2033, requiring big cuts

Lisa McCormick, a prominent advocate for progressive tax reform and equitable social policies, issued a stark warning that Social Security’s Old-Age and Survivors Insurance (OASI) Trust Fund, reserves are on track to be depleted by 2033 unless action is taken by Congress.

McCormick once again called on lawmakers to “Scrap the Cap” and make other progressive alterations to the tax laws to safeguard the long-term sustainability of this vital program.

One key issue raised by McCormick is the cap on Social Security payroll tax contributions, which has resulted in a skewed burden of taxation.

“Today, a billionaire pays the same amount of money into Social Security as someone who makes $160,200 a year because the Social Security payroll tax is capped,” said McCormick.

This unfair situation has led to a situation where high earners, including ultra-wealthy individuals like Mark Zuckerberg, Elon Musk, and Jeff Bezos, do not contribute to Social Security at all.

According to Sarah Rawlins of the Center for Economic and Policy Research (CEPR), “Despite earning much more than the average worker, a millionaire’s effective tax rate is far lower. The vast majority of workers are paid less than $160,200 per year, so they pay the 6.2% Social Security payroll tax on all of the paychecks they receive in 2023. But workers who earn over $160,200 pay no tax on their earnings above this level. For a millionaire, only about 1% or less of their total earnings go to supporting Social Security.”

McCormick stressed the importance of addressing this disparity in tax contributions to secure the future of Social Security.

“Social Security provides one in six Americans with retirement, disability, and survivor benefits,” said McCormick. “Ninety-four percent of American workers pay the 6.2 percent Social Security payroll tax on every dollar they receive in 2023, but the richest six percent stop paying. It is fundamentally unjust that those who can most afford to contribute to our society’s well-being evade their responsibility.”

To ensure the long-term viability of Social Security, McCormick has called on Congress to “Scrap the Cap” by lifting the limit on Social Security payroll tax contributions and implementing other progressive alterations to the tax laws.

By doing so, the burden of supporting this critical program would be more fairly distributed, allowing it to continue providing retirement, disability, and survivor benefits to millions of Americans.

McCormick warned, “We cannot afford to let the Social Security system crumble under the weight of a broken tax structure. It is time for Congress to take action and enact the necessary changes to protect the future of Social Security for generations to come.”

Annual government reports on the solvency of the programs underscored the danger McCormick raised about the long-term viability of Social Security and Medicare but in February, she cited a CBO study that says things are worse than previously known.

At that time, McCormick warned Americans that Republican lawmakers were plotting to make senior citizens pay the price for reckless economic policies that have created a bad situation.

“The House Republican Study Committee’s 2022 budget blueprint – endorsed by more than 180 GOP members of Congress – contained outright benefit cuts,” said a report from the National Committee to Preserve Social Security and Medicare. “It would raise the Social Security full retirement age to 70, slashing lifetime benefits for some seniors by more than 20%. The GOP blueprint also would reduce annual cost-of-living adjustments (COLAs) and means-test benefits. All of those are cuts, plain and simple.”

Painful reductions in benefits could become a reality for retired 66 million seniors and 13 million children whose wage-earning parent died if lawmakers keep ignoring the problem, warns McCormick, who said there are smarter ways to fix the system fairly and quickly.

Following up on that warning, McCormick refreshed her proposal to ‘scrap the cap’ on Social Security taxes, so wealthy Americans would contribute on all their income just like the vast majority of workers.

The maximum amount of earnings subject to the Federal Insurance Contributions Act (FICA)—the payroll tax imposed on both employees and employers to fund Social Security and Medicare—is $160,200.

By eliminating the ‘cap’ and subjecting all income to FICA taxes, McCormick believes revenue flowing into the Social Security system would be sufficient to keep it solvent for the foreseeable future even if benefits increased and the retirement age was lowered.

McCormick would restore solvency to the system by making America’s richest people—the wealthy one percent who do not contribute to the nation’s retirement system—pay the same tax that everybody else pays.