Corporate Greed Economy Sam Pizzigati

Taxing the Rich to Boost Social Security

Instead of growing financial security, Sam Pizzigati says the current retirement system in the U.S. is growing greater overall economic inequality.

By Sam Pizzigati / Inequality.org

Do you have a good pension? Do you have any pension at all?

Back in 1975, most Americans who worked for established employers could say that they do indeed have a decent pension. Back then, what the experts call “defined-benefit” pension plans set the standard.

If you worked for a company with one of these plans, you could look forward to receiving — for every month of your retired life — a pension check based on your salary and years of service.

These defined-benefit plans gave employers the responsibility for funding their employee retirements. Employers contributed into retirement funds and used the investment returns these funds generated to keep pension checks flowing. If those returns came up short, employers had to fill the shortfall.

Corporate execs, not surprisingly, didn’t like bearing that risk. Over time, they maneuvered to shift the pension risk onto employees, mainly by substituting “defined-contribution” plans for the defined-benefit pensions that had their heyday in the decades after World War II. By the early 2000s, pensions had essentially morphed into employer-sponsored savings plans.

In this new “defined-contribution” universe, employees have been contributing their own dollars into their own personal retirement accounts, with employers sometimes adding a bit of a match into the mix. The employees get no guaranteed retirement check, just the money contributed into their personal retirement account and whatever investment income the dollars in the account generate.

If those investments don’t deliver, tough luck — for the employee.

In other words, with 401(k)s and other types of defined-contribution plans, workers bear all the economic risk. And in times like today, with a swooning stock market, that risk looms large for the vast majority of American workers since, as CNN reports, only 4 percent of the nation’s workforce now have their retirement relying on a defined-benefit pension plan, “down from 60 percent in the early 1980s.”

And what has this tilt toward 401(k)s and the like meant for average working Americans? The National Institute on Retirement Security addressed that question last year in a landmark study.

“The United States,” the Institute concluded, “has seen retirement security for many working families deteriorate in recent decades as collective sources of retirement income, such as Social Security and pensions, have been allowed to weaken, while defined contribution plans have dominated the private sector.”

The Affluence Benefit

This retreat from collective sources of retirement income does have its fans. The affluent have benefited from 401(k)s far more than average workers, and that dynamic doesn’t figure to change. These affluent, CNBC financial planning analyst Kate Dore observed earlier this month, will always be more able to contribute substantial shares of their paychecks into their 401(k)s, “allowing more time for compounded growth and greater tax benefits over time.”

The greater tax benefits have added up. Over half the tax breaks for company retirement plans are now going to our top 10 percent of income-earners.

In other words, we’re not growing retirement security in the United States today. We’re growing — with our current approach to retirement — greater overall economic inequality. The already affluent have become more affluent, and everyone else has become more insecure.

What else could we expect, suggests Tyler Bond from the National Institute on Retirement Security, in a society where income and wealth have furiously concentrated at our economic summit?

“A retirement system built around the individual ownership of financial assets cannot successfully provide retirement security,” Bond notes, “if the bottom half of near-retirees only owns 2 to 3 percent of their generation’s financial assets.”

So what can we do to start reversing the retirement status quo?

Social Security

“Discussions of how to improve retirement security for all Americans often ignore the fact that the United States already has a nearly universal retirement savings system: Social Security,” note Bond and his colleague Dan Doonan in a new National Institute on Retirement Security study published last month. “A starting place for strengthening retirement security should be with Social Security.”

In Congress, progressive lawmakers have just launched an effort to shove America in just that direction. They’ve introduced legislation — the Social Security Expansion Act — that would significantly increase the benefits that Social Security provides and pay for those benefits by increasing taxes on America’s most wealthy.

An American making $147,000 currently pays 6.2 percent of that take-home in Social Security payroll taxes. But Americans making $1.47 million pay just 0.6 percent of their income to Social Security.

“That may make sense to somebody,” Sen. Bernie Sanders told a Senate hearing earlier this month. “It doesn’t make sense to me.”

Sanders and Sen. Elizabeth Warren are sponsoring the Social Security Expansion Act, along with six other Senate co-sponsors, and Rep. Peter DeFazio has 19 co-sponsors on companion legislation in the House.

Under current law, income over $147,000 faces no Social Security tax. Passage of the Social Security Expansion Act would apply the Social Security payroll tax, says Sanders, to “all income — including capital gains and dividends — for those who make over $250,000 a year.”

The new revenue from that move would guarantee existing Social Security benefits for years to come and increase Social Security benefits “by $2,400 a year for both new and existing recipients, lifting millions of senior citizens out of poverty.”

That sort of political move would also enjoy broad support. New national polling from the University of Maryland’s Program for Public Consultation shows “overwhelming bipartisan support” for subjecting income over $147,000 to Social Security tax, the core of the proposed Social Security Expansion Act. Some 88 percent of Democrats back that move — and 79 percent of Republicans!

“Maybe, just maybe,” says Sanders, “we might want to start listening to the overwhelming majority of the American people who want to expand Social Security and stop listening to right-wing billionaires who want to cut, privatize, and dismantle it.”

Sam Pizzigati
Sam Pizzigati

Sam Pizzigati co-edits Inequality.org at the Institute for Policy Studies. His latest books include The Case for a Maximum Wage and The Rich Don’t Always Win. This op-ed was adapted from Inequality.org and distributed by OtherWords.org.

20 comments

  1. Approaching real economic growth with the use of market driven debt-free trade is a far superior way to support wealth creation and greater government revenues.

    The rest can take care of itself, which includes lower tax rates and stronger social safely nets.

    1. To Michael,
      Oh, baloney – the “market”, by definition, cannot provide “income security”
      You peddle this “market” nonsense on just about every post here – even when it clearly doesn’t address the issues raised in a post … Feel free, but I hope, by this time, nobody is paying any attention to you …
      When I call my Sen. offices, e.g. – I don’t tell them to “Listen to Michael G. “

    2. We carried the rich when they paid 0 taxes now the seniors need the rich to carry us. Come you all let’s not be so greedy. We are struggling to buy food and after all the help from us you are trying to block SocialSecurity Expansion Act. One thought you cannot bring it with you and statistics say you heirs will blow the money you leave them. Help the economy now and it will help you. HELP THE SENIORS !! June 2022

      1. –>>> We carried the rich when they paid 0 tax ….

        You carried debt is what you carried. When is the last time you conducted a transaction without the use of fiat currency (debt) ?

        Inflation is the underlying rationale for unfair taxation, higher prices and economic decay. If you contribute to the distribution of debt, should you not pay the price ?

        Using debt is not a requirement for market trades. It’s a choice.

  2. Funny stuff. Social security? We tax ourselves, workers, for a pittance?

    Hmm, if we had true public transportation, public housing that is not prison, public utilities run by sane people, public banks, public insurance, public health care, free drop-in clinics EVERYWHERE, dental facilities EVERYWHERE, mental health pro’s assisting those in grief, PTSD, etc.

    Taxing billionaires and multimillionaires? That’s it? As Raj and the doctor, a great look, but sort of just repeated = capitalism as inflamation disease.

    Ahh, Raj is great. Hear my interview of him years ago, here, scroll down:

    https://paulhaeder.com/podcast/podcast-2/

    But, he’s just coming to this? From a friend in California: “Our Bodies, Societies and Planet Are Inflamed for the Same Reasons

    https://www.counterpunch.org/2022/06/20/our-bodies-societies-and-planet-are-inflamed-for-the-same-reasons/

    But how will corporate CEO’s sell their medicines for shaky butt syndrome and become stinky rich if we heal the things that cause it which is predatory financial capitalism.”

    Reality! Get rid of multimillionaires and billionaires!

    Environmental racism (1980); Weathering and black men and women in USA (1992)?

    I feel as if we are in this gerbil wheel, round and round we go, with the same stuff repeated. If you look at my two-plus years over at the radio station, listen to some of these interviews, you’ll see absolutely NOTHING has changed for the better. Changed? Yep. Fourth industrial revolution. Transhumanism. Democratic Party backers as fascists. Republicans as fucking mentally retarded collectively. The masses more amassed in Stockholm Syndrome. Yep, change change change.
    https://paulhaeder.com/podcast/podcast-2/

    Referencing:

    https://onebreathhou.org/newsroom/2021/01/dr-robert-bullard-houston-environmental-justice/

    In the 1980s, Dr. Robert Bullard and his team at Texas Southern University in Houston’s Third Ward found that most of the hazardous city-owned facilities like dumps and incinerators were being disproportionately sited in historically Black and brown neighborhoods. “Black Houston has become the dumping grounds for the city’s household garbage,” he wrote in the ‘90s. The first road the city paved into Sunnyside led to the dump.

    This work helped illuminate larger patterns of racist discrimination in unequal exposure to pollution and lack of access to housing, transit, food, health care and other essentials — what the writer Brentin Mock calls “all of the good stuff” that allow communities to flourish — that have deepened and entrenched inequality.

    Dr. Bullard’s relentless pursuit to demonstrate the disparities in the oil and gas capital of the world led to a recognition of the field now known as environmental justice. In 2020, the man known as “the father of environmental justice” was recognized with a Lifetime Achievement Award from the United Nations Environment Programme as a “Champion of the Earth.” His work began with markers, pushpins and maps, and it’s now the bedrock of a multigenerational, multiracial movement. Here, we collect reflections from organizers, writers, allies and advocates on his impacts on their own work.

    +–+

    The term “weathering” was coined in 1992Trusted Source by Dr. Arline Geronimus, at the time a researcher in the Department of Public Health Policy and Administration at the University of Michigan in Ann Arbor.

    Currently, Dr. Geronimus is a professor in the Health Behavior and Health Education department of the same university.

    While studying trends in women’s fertility, Dr. Geronimus had observed that African American women do not have the same “prime” childbearing years as their white counterparts.

    Namely, an average white woman is considered to have the most fertility and the lowest risk of unhealthy pregnancy and neonatal mortality when she is between 20 and early 30 years old, notes Dr. Geronimus in her paperTrusted Source.

    However, for African American women, this peak of fertility and point of lowest risk was in their teens. In other words, Black women in the United States were more likely to have a healthy pregnancy in their late teens than in their mid-twenties.

    Dr. Geronimus then first advanced the “weathering hypothesis” as a potential explanation for these maternal and infant health disparities.

    In her groundbreaking paper, she defines the weathering hypothesis as the idea “that the health of African American women may begin to deteriorate in early adulthood as a physical consequence of cumulative socioeconomic disadvantage.”

    +–+

    Like Brawley, Gaskin has had his own close encounters with law enforcement, including an incident in which police pulled him over, and officers emerged from six cruisers and approached him with their guns drawn. (His temporary license plates had been stolen off of his new car and they presumed he was a criminal.)

    “The indignity that one must endure—if you don’t express that rage … you start to internalize it, so it’s not a wonder that people struggle with high blood pressure and have higher rates of stroke, because you’re constantly on alert,” Gaskin says, citing writer James Baldwin’s description of being a “relatively conscious” Black man in America is “to be in a rage almost all the time.”

    https://magazine.jhsph.edu/2020/why-black-men-america-have-worse-health-white-men-and-what-needs-change

    1. To Paul+
      And what the hell does that to do with SS? and secure incomes?
      Of course the issues you raise are relevant to the “general Welfare” but why can’t you address the issue raised in this post?

      1. Oh no, more ranting fools. Skip over any comment you so desire. So, taxing us, the 85 percent, for social security, that has nothing to do with taxing the rich?

        And, is taxing where the milquetoast Sheared Off posters are at now?

        We need communism, and you know that!

        While Marx and Engels present no overarching theory of inequality they do frequently discuss income inequality, and tax inequality – but with a striking contradistinction. Whereas Marx and Engels clearly perceive income inequality as irremediably inevitable under capitalism, reducing tax inequality, in contrast, is regarded as perfectly achievable while capitalism persists.

        Marx makes the case for the legitimacy of income inequality both in the Grundrisse (‘the wages being paid are economically just, i.e. determined by the general laws of political economy’) and in the Critique of the Gotha Programme (‘the only “fair” distribution on the basis of the present-day mode of production’). Engels argues similarly, first in Anti-Dühring, where ‘the manner in which wealth is distributed’ is dependent on the prevailing structure of production, and then in his 1885 Preface to the Poverty of Philosophy (‘the greatest part of the product does not belong to the workers who have produced it. If we now say: that is unjust, that ought not to be so, then that has nothing immediately to do with economics’). The inequality – prevailing production nexus is encapsulated in Lawyers’ Socialism, the 1887 rebuttal by Engels (with help from Karl Kautsky) of Austrian lawyer Anton Menger, ‘the demand for equality, just like that for the full fruits of one’s labour, became entangled in insoluble contradictions … leaving the heart of the matter, the transformation of the mode of production, more or less untouched’.

        Marx and Engels seem no less definite, for the most part, that tax inequality, in contrast, can be addressed by tax reforms that do not require the advent of communism. This latter notion needs to be caveated by their writings in the 1840s, where tax proposals do go hand in hand with communism, but the progressive income tax, for instance, called for in that decade becomes subsequently, right up to the 1890s, a policy preference detached from communism, featuring in discussions of the English budget, the Gotha Programme and the 1891 draft programme of the German Social Democrats.

  3. Well, those rightwing billionaires run the show, Bernie, and you don’t. The Party you, for all intents and purposes, belong to is owned by the billionaires and Wall Street. As is the other Party.
    This SS thing will shape up to be another perennial fantasy, like Med4All, which you didn’t talk about for months after your Party told you not to.

    1. To Tim,
      Spot on! the problem is that because so many have been brainwashed to believe the lie that TINA (there is no alternative) to D/Rs, they think they must choose either or not vote at all – and a whole lot of folks choose the latter …

      I keep hoping that Scheerpost will have some, many, discussions on 3rd parties to discuss some simple facts 1) there ARE alternatives 2) that anybody on a ballot can win if enough folks vote for ’em, a fact I have never seen refuted 3) that the D/Rs know this and are taking steps to make sure such 3rd parties don’t get on the ballot,or into debates, or have access to Fed’l matching funds – then a discussion of WHY folks don’t vote in electoral polls as they do in opinion polls ….

      We talk about “threats to democracy” in terms of voting rights – but what good is the expansion of voting rights when you are restricted to voting for 2 parties – who act just like each other even if the rhetoric is different …

      Where is real “political courage” ioff our Prog sites if they refuse to engage in this discussion … Ironic if 3rd parties are the 3rd rail in our politics …

      1. It’s not much harder to corrupt three parties then it is two. Why do you think we promote “democracy” all over the world? It’s because democracies are the easiest form of government for the US to subvert. Socrates nailed the problem with democracies over two thousand years ago…the average person is an idiot and is far too easily swayed by the words of evil people. Your not going to vote your way out of this. No how no way.

  4. Rubbish. You will have to pry the money from the wealthy to boost Social Security out of their cold dead hands. The reality is the power elite intend to privatize Social Security and ultimately, to let the old and infirm simply die quickly and quietly as to reduce the surplus population, after of course draining them of every crumb of savings on incredibly expensive medical procedures and medications.

    As far as Bernie goes, who cares what that sell out thinks about anything. He is a fraud and a coward.

    If wishes were horses and rainbows led to pots of gold….drivel…..

  5. Another pre election Dems’ hack allowed on SP as they are desperate to lose their jobs in November. The US senators or alleged representatives of “we the people” , without counting bribes, are in the top 1% earning bracket.

    How dare you politicians, corrupted stooges of oligarchy to even open your mouths supposedly on behalf of 70+% of American population of working poor who cannot save more than $1000 for emergencies and whose dire socioeconomic conditions are caused by your submission to ruling oligarchs.

    US Social Security in its form is and was a scandal from the beginning .

    It was introduced, together with unemployment insurance and job corps by FDR not to help jobless and poor in America but in his own words, to save capitalism from workers revolution as complete failure of capitalism to support Society became obvious to 99% of Americans during Great Depression .

    As any socially beneficial activity called labor, Social security itself should be all about providing for older workers guaranteed access to healthy food, safe secure and adequate shelter, means of maintaining companionship and family/community ties and opportunities to create. That’s it.

    And no, elderly need no money as money, controlled by oligarchic class and banking mafia brings no social security to anyone but instead promotes social insecurity of old age while value of money by ways of national treasury robbery and inflation dissolves into nothing as we see it most vividly today as cost of living skyrocketed.

    People who worked whole their lives as a result are simply exhausted, worn off by daily grinders of their contribution to society (labor) , family and community participation and responsibility and are simply for many reasons including ailing health and performance unable to effectively contributing to socioeconomic development to the same level required by needs of society. They must be socioeconomically secured in material and social living in their old age.

    Unfortunately no taxes on oligarchy, who are allowed to control everything, older and younger people need won’t do anything to solve the systemic problem of legalized robbery of society by oligarchic class and their minions.

    It is their stolen from workers loot, called private wealth if consumed or capital if invested, that must be equally, equitably distributed in egalitarian ways to assure social security of people.

    On the other hand “surgical” separation of wealth stolen from people by oligarchs via means of workers’ revolution and then reprogramming billionaires out of cult of worshipping capital so they can join normal mentally healthy society may do us some good.

    Better yet, putting 100,000 of oligarchs on the bottom of the blue sea would be much more effective and realistic first effective step to fix social security for all.

    How about placing that on the ballot Dems?

    Anything else is a sham and political deceit.

    Advice to voters;

    “The individual loses his substance by voluntarily bowing to an overpowering and distant oligarchy, while simultaneously“participating” in sham democracy.”

    C. Wright Mills,”The Power Elite” (1956)

  6. 1. The income cap beyond which people don’t pay Social Security tax should be abolished. This is another example of the rich not paying their fair share.

    2. Social Security benefits should be means tested. Rich people don’t need those benefits, and by getting them they’re taking money from people who do need them.

    1. J;
      With all the legal and tax loopholes rich are out of government’s control. They are the government. If you tax them they will work for zero salary and live of cooperations and foundations like in was in 1940s and 50s with up to 90% individual tax. Marilyn Monroe, Elizabeth Taylor were a single person corporations.

      1. You and Jeff are both chasing windmills. Tax is not a problem so don’t even focus on fiscal issues.
        Tax is a symptom of over-leveraged inflationary debt where someone has to pay that cost. Strike the root !

        Real economic growth doesn’t just create more wealth creation and a lower cost of living and higher gross tax revenues for government but also allows for central banks to SAFELY raise interest rates to have inflationary debt purged from circulation.

        The cost of living is lowered as the economy grows in the real sense. Now is the big question to be redirected toward and that’s about how we increase the efficiency of real economic growth. The rest will fall together.

      2. @Kalen
        That’s true, but the loophole should be eliminated regardless. But you’re right, getting the rich to pay their fair share of taxes means going after other things than technical income, because that’s not how the rich get their money any longer.

    2. So you condone theft by taxation ?

      Why don’t you consider growing the economy in a more efficient manner and ratcheting up government’s revenue and affordability ?

      Your 2 points are 2 points that contribute to the further decay of the real economy. Do you value your economy ???

  7. So true, and by the 1990’s t(e corporations were finding the way to stop having qualified pension plans altogether. I work for a few companies that had no pension plans, only 401 K’s if that. Now lots of people are “bare” (no pension). It’s a very bad situation, especially with Social Security not going up with inflation. And if the Oligarchy manages to end SS , then everybody will be screwed!!!

    1. No need to panic. Real economic growth can pad everyone’s wallets and it’s up to the free market to make that happen but it cannot happen on the back of debt (legal tender) and debt alone.

      The marketplace now has to use its own market currency, debt-free, not just use fiat currency, only.

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