FacebookTwitterGoogle+RedditEmail

Social Security’s Dual-Income Trap

by SALVATORE BABONES

U.S. workers have paid a reduced Social Security tax rate of 4.2 percent for the past year and a half, down from the ordinary rate of 6.2 percent. For most Americans, this has meant some welcome tax relief. But one group is still paying more than its fair share.

Families with two breadwinners can end up paying more than twice as much in Social Security taxes as families with just one income.

At current Social Security tax rates, a married couple in which each partner independently earns $100,000 pays a total of $8,400 in employee Social Security taxes. A single breadwinner earning $200,000 pays just $4,624. A single breadwinner earning $200 million or $200 billion pays the same $4,624.

The reason is that Social Security taxes are paid only on the first $110,100 of each individual’s wages.

Because of the complexities of Social Security tax rates and the fact that Social Security taxes are based on individual earnings instead of total family income, dual-income couples pay more in Social Security taxes than anybody else.

As a result, a typical New Jersey married couple in which an actuary (average annual salary $100,050) is married to a database administrator ($82,750) pays 66 percent more in Social Security tax than either New York’s bachelor mayor Michael Bloomberg or the unmarried shortstop Derek Jeter.

A married Iowa optometrist ($104,370) and radiation therapist ($82,190) together pay 69 percent more than a single Chicago commodities trader or actor George Clooney, who got divorced in 1993 and says he’ll never get married again.

Now, no one is going to starve on combined family incomes like these. But there’s a big difference between a family where a single breadwinner makes $200,000 or more a year and a family where two working parents scrape together $200,000 a year on their combined incomes.

Individuals earning more than $110,100 in wage income should pay the same Social Security taxes at the same 4.2-percent rate as everyone else. This isn’t just fair. It’s also fiscally prudent.

When Congress lowered the individual Social Security tax rate from 6.2 percent to 4.2 percent, it didn’t balance this with sufficient taxes or cuts to replace the lost revenue. Applying the reduced 4.2-percent tax rate to all wage income would more than make up for the lost revenue.

To make the Social Security system solvent forever, Congress could simply apply the reduced 4.2-percent individual Social Security tax to all income instead of just wage income. Currently, investment income isn’t subject to Social Security tax at all.

We shouldn’t penalize dual-income families to subsidize highly compensated individuals. Washington should close the dual-income trap by levying Social Security taxes on all wage income.

Better yet, apply the 4.2-percent Social Security flat tax to all income. With everyone paying their fair share, we can afford to make the reduced 4.2-percent Social Security tax rate permanent — and at the same time ensure that Social Security will be there for our children and grandchildren as well.

Salvatore Babones is a senior lecturer in sociology and social policy at the University of Sydney and an associate fellow at the Institute for Policy Studies (IPS). He is the author of the forthcoming book, Benchmarking America. He can be reached through his website.

This column was distributed by OtherWords.

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

January 16, 2017
Paul Street
How Pure is Your Hate?
Robert Hunziker
Global Warming Clobbers Ocean Life
Patrick Cockburn
The Terrifying Parallels Between Trump and Erdogan
Kenneth Surin
The Neoliberal Stranglehold on the American Public University
Lawrence Davidson
Is There a Future for the Democratic Party?
Robert Fisk
The Foreign Correspondent in the Age of Twitter and Trump
Dale Bryan
“Where Do We Go from Here?”
David Swanson
The Deep State Wants to Deep Six Us
Dan Bacher
Obama Administration Orders Speedy Completion of Delta Tunnels Plan
Mark Weisbrot
Obama Should Make Sure that Haitian Victims of UN-Caused Cholera are Compensated
Winslow Myers
The Light of the World
Bruce Mastron
My Latest Reason to Boycott the NFL: Guns
Weekend Edition
January 13, 2017
Friday - Sunday
Gregory Elich
Did the Russians Really Hack the DNC?
Jeffrey St. Clair
The President Who Wasn’t There: Barack Obama’s Legacy of Impotence
Anthony DiMaggio
Ethics Fiasco: Trump, Divestment and the Perversion of Executive Politics
Joshua Frank
Farewell Obummer, Hello Golden Showers
Paul Street
Hit the Road, Barack: Some Farewell Reflections
Vijay Prashad
After Aleppo: the State of Syria
John Wight
Russia Must be Destroyed: John McCain and the Case of the Dodgy Dossier
Rob Urie
Meet the Deplorables
Patrick Cockburn
The Russian Dossier Reminds Me of the Row Over Saddam’s WMDs
Eric Sommer
U.S.-China War: a Danger Hidden from the American People
Andrew Levine
Are Democrats Still the Lesser Evil?
Linda Pentz Gunter
What’s Really Behind the Indian Point Nuclear Deal?
Robert Fantina
Trucks, ‘Terror’ and Israel
Richard Moser
Universal Values are Revolutionary Values
Russell Mokhiber
Build the Bagdikian Wall: “Sponsored News” at the Washington Post
Yoav Litvin
Establishment Narcissism – The Democrats’ Game of Thrones
David Rosen
Return of the Repressed: Trump & the Revival of the Culture Wars
Robert Koehler
War Consciousness and the F-35
Rev. William Alberts
The New Smell of McCarthyism Demands Faith Leaders Speak Truth to Power
John Laforge
Federal Regulator Halts Move to Toughen Radiation Exposure Limits
Norman Pollack
Farewell Address: Nazification of Hope
David Swanson
Imagine the Confirmation Hearing for Secretary of Peace
CJ Hopkins
Why Ridiculous Official Propaganda Still Works
Ron Jacobs
Striking in Reagan Time
Missy Comley Beattie
The Streep
Graham Peebles
Climate Change: The Potential Impacts of Collective Inaction
Uri Avnery
Confessions of a Megalomaniac
Kenneth Worles
Black Without a Home: King’s Dream Still Deferred
Geoff Dutton
The Russian Patsy
Jill Richardson
The Coming War on Regulations
Jeremy Brecher
Resisting the Trump Agenda is Social Self-Defense
Peter Lee
Is Obama Behind the Hit on Trump?
Christopher Brauchli
Why Did Congress Do It? Because They Can
FacebookTwitterGoogle+RedditEmail