WASHINGTON – The AFL-CIO, the labor-backed Alliance for Retired Americans, the Steelworkers and the Auto Workers back new legislation to close Social Security’s future funding gap – which won’t begin for another 20 years – by taxing millionaires and billionaires, sponsors of the legislation say.
The lawmakers, Sen. Bernie Sanders, Ind.-Vt., and Rep. Peter DeFazio, D-Ore., dropped their proposal in the congressional hopper on March 7. It would extend Social Security’s payroll tax of 6.2 percent, which now applies only to paychecks up to $113,000 yearly. Their bill would reinstate it on all income – not just paychecks – over $250,000.
“Ninety-four percent of the country pays Social Security taxes on all their income. Six percent do not. This has got to change,” Sanders, chair of the congressional Save Social Security Caucus, declared at a press conference.
The senator explained that Americans “take it for granted” that Social Security will pay full benefits, because it has for 77 years “in good times and bad. And it’s not contributed one red cent to the deficit.”
That hasn’t stopped congressional Republicans and other Social Security foes from claiming it faces a shaky financial future. Foes also contend Social Security must also “contribute” to cutting federal red ink. The foes cite actuaries’ estimates that in 2033, Social Security will have only its payroll taxes to rely on – which will then cover only 75 percent of planned benefits. Their solution: Cuts, and raising the retirement age.
Sanders called the claims of financial failure a lie, but admitted Social Security should be financed to pay full benefits for 50-75 years. His solution is to tax the millionaires and billionaires, including their investment income and bonuses as well as their paychecks. He says that would raise $85 billion yearly those decades.
“Someone making $1 million a year paid 0.6 percent of his income for Social Security,” DeFazio said. “A cop on the beat paid six percent. This is unfair and a huge loophole.”
The legislation would also halt plans to cut cost-of-living hikes for present and future Social Security recipients by changing the consumer price index used to calculate yearly benefit hikes. The “chained CPI” would cut a senior’s annual Social Security income by $675 yearly at age 75 and more than $1,000 yearly at age 85.
The AFL-CIO Executive Council, in a Feb. 27 statement, called opposition to cutting Social Security and to the chained CPI “the right approach.” Last December, Ed Coyle, executive director of the Alliance for Retired Americans, also opposed it.
“We cannot ask workers and retirees to pay the price for a problem they did not create,” he said then. “We must reject the chained CPI. And we must change our badly-flawed tax system, one that regularly puts Social Security at risk to pay for more tax breaks for the wealthy. It’s long past time that we stop asking those with the least to sacrifice the most.”
Steelworkers President Leo Gerard said the union “is proud to stand with you and support this vital legislation to protect the integrity and longevity of our nation’s retirement system. Your bill will make Social Security fully solvent for the next 75 years and do so without having to take the damaging actions some have so callously called for; such as raising the retirement age or cutting modest benefits that often are the difference between a retirement lived in dignity or one lived in fear and poverty.”
“This takes into account critically important facts that are often deliberately disregarded in the hot political rhetoric of today,” Gerard continued: A ban on Social Security borrowing from general revenues and the fact it “has enough dedicated revenues to continue to pay 100 percent of promised benefits for at least the next 26 years.
“Your bill would ensure scheduled benefits would continue to be paid in full and on time for the next 75 years thereafter by one simple and fair change – having those making annual wages of over $250,000 assume their fair share,” Gerard wrote to the lawmakers.
“This will…fairly place these wealthiest of Americans finally on an equal footing with wage-earners who earn much less, yet make payroll contributions on every cent. With that additional revenue, Social Security will remain in long-range balance without cutting benefits to retirees, the infirm, orphans or widows who lose a wage-earner.”
Sanders said Senate Majority Leader Harry Reid, D-Nev., is a co-sponsor of the bill, thus increasing its chances there. DeFazio, facing a GOP House majority, said its prospects there are linked to those of comprehensive tax reform, which both parties say they want. “This is tax reform,” he commented.
Photo: An Occupy event takes place in Brick, N.J., in which demonstrators protest the income gap between the wealthy and everyone else. Jacquelyn Martin/AP