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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. |
