By Joe Goldman, AmericaSpeaks
Last week marked the 75th anniversary of our nation’s Social Security system.
Social Security, which President Franklin Roosevelt and Congress created in 1935, currently provides retirement, survivor, and disability benefits this year to about 53 million Americans – one out of every six of us. Social Security beneficiaries include about 37 million Americans aged 65 or older, nine million below that age who are disabled, and more than seven million others, such as early retirees or children whose parents are deceased, disabled, or retired.
The program is financed largely through payroll taxes on employers and employees. Currently, an employer and employee each pay half, or 6.2%, of the 12.4% Social Security tax on the wages of that employee up to $106,800 of income (with wages above that level free from payroll taxes). That wage limit rises each year to keep pace with average earnings.
The payroll taxes of today’s workers largely go to pay the benefits of today’s retirees. Currently, there are three workers to each retiree. By 2025, that ratio is projected to fall to 2.3 to one. As the population ages, the share of workers will fall while the share of retirees grows, creating larger and larger imbalances in the program’s financing.
To learn more about who receives Social Security benefits, how the program has changed over time, and options for reform, download the Our Budget, Our Economy workbook.
Much has been written and said about reforming the Social Security system lately. Here is what participants at the June 26th National Town Meeting had to say about it:
An option to raise the earnings cap on payroll taxes received support from 60% of participants and raising payroll taxes by at least 1 percentage point was supported by about half of participants (combining those who supported an increase of payroll tax to 13.4% or 14.4%.)
No option to reduce benefits received support from a majority of participants. Among options that reduced benefits, the most popular was raising the age of receiving full benefits to 69 by 2028, which received 39% support.
Raising the earnings cap on Social Security payroll taxes was supported by strong majorities of between 62% and 73% among those who are liberal to somewhat conservative. 36% of conservative participants supported raising the cap.
Raising payroll taxes by at least 1 percentage point was most popular among those in the middle: moderate, somewhat liberal, and somewhat conservative participants (53-67%). It was supported by 47% of liberal participants and 37% of conservative participants.
Learn more by reading the report from the National Town Meeting.
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