One day last week, I received my Social Security Statement. It seems to come every year right around W-2 time. I looked at it and checked it for accuracy. I also realized that I will not see most of the monies that I have paid into the system since 1987.
Recently, on my limited listening of talk-radio, I kept hearing over and over again how Social Security will pay out more than it takes in now that the Baby Boomer generation is now in the retirement phase of their lives. I noticed something that I had seen before on the statement but had not thought about much because it did not apply to me. I have never made over $106,800. In fact, I have never made over $40k in my lifetime!
You currently pay 6.2 percent of your salary, up $106,800, in Social Security taxes and 1.45 percent in Medicare taxes on your entire salary. Your employer also pays 6.2 percent in Social Security taxes and 1.45 percent in Medicare taxes for you. If you are self-employed, you pay the combined employee and employer amount of 12.4 percent on Social Security taxes and 2.9 percent in Medicare taxes on your net earnings.
I have been self-employed for a short time in my life and have paid the 15.3 % in Social Security and Medicare taxes. I am now currently an employee and pay the 7.65% for Social Security and Medicare. What has always stumped me is why the government stops taking the 6.2% once someone makes over $106,800?
I am a conservative. I am not a big fan of Social Security, but we have no choice. We cannot choose to not pay into the system, so unless something changes, we are stuck with this broken system.
My solution may be simple and unorthodox and it may get some conservatives angry, but I still think it is a possible solution.
Why not remove the $106,800 threshold for Social Security and continue to tax Social Security at 6.2% on all earnings like Medicare? I can hear the conservatives screaming right now and calling me a liberal, socialist, etc. I have not finished with my suggestion. Along with the removal of the threshold, then increase the payment amount based on what the individual pays in (like they do now). Think of all the revenue that is missing from $106,801 on up.
If we are stuck with the system, then why not attempt to fix it by finding ways to make it work. Otherwise, why not shut it down completely and make people provide for their own retirement (a better idea) than government sponsored retirement.