[everforward]

Social Security's insolvency was created by it being a rotating door of money rather than an actual pre-funded retirement account. Its funding only ever worked so long as there were more contributors than withdrawers (i.e. the population keeps growing, and retirees don't live too long).

I also think Social Security's implementation is regressive, and this only makes that worse. Social Security is a payroll tax, so it only gets paid on payroll. I suspect that millionaires and billionaires pay very little in Social Security and would continue to pay very little because their income is almost all investments, which doesn't require Social Security tax.

Highly compensated employees are often paid largely in stock, which I believe also doesn't get hit by Social Security (but I could be wrong there).

We are talking a significant swing in tax burden for people in the upper-middle/lower-upper. At $200k, it's about close to a 3 point increase in overall tax burden (i.e. from 20% of income to 23% or what have you). At $400k, it's close to a 5 point increase (~16% increase in overall tax rate). It also double-dips because employers pay half of that; at a $200k salary, it's about an extra $4,500 in taxes from the employee and $4,500 from the employer ($16.5k from both at $400k). In reality, the employee will likely pay for both with withheld raises/bonuses that the company uses to pay for the new tax.

[acdha]

> Social Security's insolvency was created by it being a rotating door of money rather than an actual pre-funded retirement account

Perhaps, but the fund was healthy when we had a balanced budget at the turn of the century. That’s why the Bush administration was able to deliver those tax cuts for their wealthy donors since they could deploy some confabulations about increased economic growth balancing out a “minor” change and were able to drown out the people who actually do math.

[everforward]

Do you have a reference for that law/tax cut to Social Security? So far as I can tell, it has always had a maximum taxable income component dating back to 1937. I don't see any dramatic increases in the maximum taxable income component, nor do I see a dramatic cut in the rates. Looking at the charts, I don't even see a significant drop in funding other than ~2010, which is probably recession related.

Have you seen graphs like https://www.whitehouse.gov/wp-content/uploads/2024/05/1.png ?

The obvious answer (at least to me) is "the ratio of beneficiaries to contributors is substantially worse than it was in 2000, and it will only get worse in the coming years". In 2000, there were about 23 people withdrawing from SS per 100 people contributing so each worker funded about a quarter of a SS account. In 2022, that had increased nearly 50% to ~32 people withdrawing per 100 contributing, so each worker is funding about a third of a SS. By 2060, we're projected to be at 50:100, so each worker has to fund half of a SS account.

The ratio of retirees to workers has never been worse, and is only going to continue to worsen. It's either going to go bankrupt or grow to be an enormous tax.

Just extrapolating from the current numbers, the average SS monthly payout is current $1,782.74.

We're currently at 32 withdrawers per 100 payers, so 100 payers have to cover $57,047.68/month or $570.48/payer/month.

On a 2060 population curve (no inflation because SSI is indexed to wages, so both sides inflate roughly evenly), there's 51 withdrawers per 100 payers, so at the same monthly payment those 100 payers have to cover $108,747.14/month or $1,087.47/payer/month.

Even removing the income cap entirely doesn't fix that. As of 2017 (the last year I could easily Google data), 84% of earnings were taxed under SS. Removing the cap entirely would only increase SS revenue by ~20%, which only makes it solvent slightly longer. There is no way around the fact that if SS is going to stay solvent, we're going to have to either increase the tax rate substantially (or change how it's applied), decrease the payouts substantially, or change our age curve substantially with birth rates or immigration.

That's why I think they should have reformed it in like the 70s, when the age demographics were much more favorable. Changing age ratios have always been a threat to either make Social Security insolvent or make the Social Security tax balloon to an incredible size.