Last time, I explained why the "Ponzi scheme" line about Social Security that the Republicans have been pushing was nonsense.
At the end of the post, I pointed out that the other Republican line—the idea that Social Security is about to go broke—was equally false.
Which brings me to the graph below:
It takes a little explaining, but bear with me, because it's worth the "Aha!" at the end:
Based on data from Emmanuel Saez at UC Berkely Department of Economics and the Social Security Administration.
The line on the graph represents the Social Security base—the cutoff point, above which people don't have to pay into social security.
If someone makes more money in a year than that base amount, then they don't have to pay social security taxes on anything they make above it.
The rest of us, of course, have to pay the tax on everything we make, because we don't make enough.
You'll notice that the line is not measured in dollars, but in percentages.
That's because inflation and other factors would hide the insight the graph is designed to give you.
Instead, I've expressed the base in terms of the average (mean) income in the U.S. each year since 1937.
If you look at the left end of the chart, at the year 1937, you'll see how this works.
In that year, the base was a little less than three times the average income in the country.
The wealthy had to pay the Social Security tax on anything they earned up to that point, but not on anything above that point.
If someone made six times the national average, they didn't have to pay any Social Security tax at all on the top half of their income.
If they made twelve times the national average, they didn't have to pay any Social Security tax on the top three-quarters of their income.
Now you may or may not think this was a good idea, but that's how it was set up. I personally have my doubts about just how fair a cutoff point is at all. Those of us who need to worry about month left over at the end of the money pay the tax on all of our income.
If you follow the line to the right, you'll see that in the next couple of years, that figure rose to over three times the national average income, so that the wealthy had to pay the tax on a bit more of their income, before they reached the SS tax-free zone above that figure.
Then, for a combination of reasons, (including a rise in the average income and a drop in the base figure) the part of their income they paid the tax on dropped to just about the average income itself (100%), and hovered there until the seventies.
At that point it began to climb again until it got to between one and a half (150%) to twice (200%) the average income in the country—still a third less, in terms of that average, than the base the rich were taxed on when Social Security began.
To put it another way, they are now paying the tax on only about two-thirds as much of the current average income than they were back then.
So here's the point: The wealthy did not go broke in 1937 or 1938 or 1939.
They would not go broke if we raised the base again today—even if we raised it back to three times the average income, as it was in the beginning.
But we probably wouldn't have to raise it that much to make the minor adjustment that Social Security requires.
On the other hand, we could eliminate the base entirely, and make the wealthy chip in on all their income—just like most of do right now.
If we took that approach, we would not only be able to save the system, but lower the tax rate on everyone as well.
Either way, one thing is clear.
In this, as in other fiscal issues before us, there is no real emergency, other than the fact that one party is bent on protecting the wealthy from paying their fair share.
At least, that's what I think today.
