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

May 23, 2017
Patrick Cockburn
A Gathering of Autocrats: Trump Puts US on Sunni Muslim Side of Bitter Sectarian War with Shias
Shamus Cooke
Can Trump Salvage His Presidency in Syria’s War?
Thomas S. Harrington
“Risk”: a Sad Comedown for Laura Poitras
Josh White
Towards the Corbyn Doctrine
Mike Whitney
Rosenstein and Mueller: the Regime Change Tag-Team
Jan Oberg
Trump in Riyadh: an Arab NATO Against Syria and Iran
Susan Babbitt
The Most Dangerous Spy You’ve Never Heard Of: Ana Belén Montes
Rannie Amiri
Al-Awamiya: City of Resistance
Dimitris Konstantakopoulos
The European Left and the Greek Tragedy
Laura Leigh
This Land is Your Land, Except If You’re a Wild Horse Advocate
Hervé Kempf
Macron, Old World President
Michael J. Sainato
Devos Takes Out Her Hatchet
L. Ali Khan
I’m a Human and I’m a Cartoon
May 22, 2017
Diana Johnstone
All Power to the Banks! The Winners-Take-All Regime of Emmanuel Macron
Robert Fisk
Hypocrisy and Condescension: Trump’s Speech to the Middle East
John Grant
Jeff Sessions, Jesus Christ and the Return of Reefer Madness
Nozomi Hayase
Trump and the Resurgence of Colonial Racism
Rev. William Alberts
The Normalizing of Authoritarianism in America
Frank Stricker
Getting Full Employment: the Fake Way and the Right Way 
Jamie Davidson
Red Terror: Anti-Corbynism and Double Standards
Binoy Kampmark
Julian Assange, Sweden, and Continuing Battles
Robert Jensen
Beyond Liberal Pieties: the Radical Challenge for Journalism
Patrick Cockburn
Trump’s Extravagant Saudi Trip Distracts from His Crisis at Home
Angie Beeman
Gig Economy or Odd Jobs: What May Seem Trendy to Privileged City Dwellers and Suburbanites is as Old as Poverty
Colin Todhunter
The Public Or The Agrochemical Industry: Who Does The European Chemicals Agency Serve?
Jerrod A. Laber
Somalia’s Worsening Drought: Blowback From US Policy
Michael J. Sainato
Police Claimed Black Man Who Died in Custody Was Faking It
Clancy Sigal
I’m a Trump Guy, So What?
Gerry Condon
In Defense of Tulsi Gabbard
Weekend Edition
May 19, 2017
Friday - Sunday
John Pilger
Getting Assange: the Untold Story
Jeffrey St. Clair
The Secret Sharer
Charles Pierson
Trump’s First Hundred Days of War Crimes
Paul Street
How Russia Became “Our Adversary” Again
Andrew Levine
Legitimation Crises
Mike Whitney
Seth Rich, Craig Murray and the Sinister Stewards of the National Security State 
Robert Hunziker
Early-Stage Antarctica Death Rattle Sparks NY Times Journalists Trip
Ken Levy
Why – How – Do They Still Love Trump?
Bruce E. Levine
“Hegemony How-To”: Rethinking Activism and Embracing Power
Robert Fisk
The Real Aim of Trump’s Trip to Saudi Arabia
Christiane Saliba
Slavery Now: Migrant Labor in the Persian Gulf and Saudi Arabia
Chris Gilbert
The Chávez Hypothesis: Vicissitudes of a Strategic Project
Howard Lisnoff
Pay No Attention to That Man Behind the Curtain
Brian Cloughley
Propaganda Feeds Fear and Loathing
Stephen Cooper
Is Alabama Hiding Evidence It Tortured Two of Its Citizens?
Sheldon Richman
The Real Danger From Trump is Ignored
FacebookTwitterGoogle+RedditEmail