Women and Social Security Alert (WomenSSA)
Items in This Alert
Washington Scene—Disagreement over Wage Cap among Those Seeking to Privatize Social Security As President Bush continues to campaign for Social Security privatization, he said in recent interviews (Washington Post; ABC News) that he would consider raising the earnings cap that is currently set at $90,000 (the maximum amount of earnings subject to Social Security payroll taxes). Shortly afterwards, however, Republican leaders in the House of Representatives, Speaker Dennis Hastert (IL) and Majority Leader Tom DeLay (TX) opposed this option of raising the earnings ceiling. At the American Conservative Union’s CPAC 2005 Conference held February 18-19, many conservative leaders, along with several members of Congress, pushed for Social Security privatization. On February 18, Sen. John Sununu (R-NH) addressed the conference on the topic of “How the President and Congress Can Fix Social Security This Year.” In contrast to his Republican colleagues in the House, he did not speak out against President Bush’s willingness to consider raising the wage cap. Instead, he said that the essential objective of the President and Republicans is to privatize Social Security and implied that other proposed changes, such as raising the cap, are up for consideration. Research and Poll Results > Removing Wage Cap Would Strengthen Social Security for Generations to Come Currently, all covered employees (and the self-employed) contribute to Social Security through payroll taxes at the rate of 6.2% for their earnings up to $90,000 (in 2005); employers contribute a matching 6.2% for each employee. Social Security benefits are also calculated based on a formula that considers earnings up to this cap. The maximum taxable amount is updated annually based on increases in the average wage. According to annual statistics of the Social Security Administration (SSA), about 6% of covered workers in 2001 had earnings above the cap ($80,400 in 2001). And, men were more likely than women to have earnings above this cap (9% of men versus 2.5% of women). Although the percentage of men and women with earnings above the cap is small, the excluded earnings represented nearly 15% of total earnings in covered employment. A research note by the Economic Policy Institute “Removing the Social Security earnings cap virtually eliminates funding gap”, based on SSA actuarial estimates, shows that closing this “millionaire loophole” would fix Social Security’s projected shortfall. Removing the earnings cap on taxes and benefits would reduce 90% of the funding deficit forecast by the SSA, while it would completely eliminate the deficit forecast by the Congressional Budget Office under more optimistic economic assumptions. > Eight in Ten Americans Think Earnings Above $90,000 Should Be Subject to Social Security Taxes The public is supportive of the idea of removing the earnings cap as a solution for Social Security’s long-term financial shortfall, compared to other alternatives. According to a recent poll conducted by the Washington Post, Kaiser Family Foundation, and Harvard University, 81% of Americans (aged 18 and older) believe that people should have to pay Social Security taxes on their earnings above $90,000, when informed that currently earnings over $90,000 are exempt from Social Security payroll taxes. Facts > IWPR’s new fact sheet “Who Are Social Security Beneficiaries?” shows:
> A special report released by the Democratic Policy Committee, “Privatizing Social Security: Benefit Cuts and Debt for Our Familias,” (available both in English and Spanish) highlights the importance of the current Social Security program for Hispanic Americans:
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