As Republicans on the Ways and Means Social Security Subcommittee prepare for a Thursday hearing on Social Security’s finances, we noticed some key facts missing from their advisory:
REPUBLICAN ADVISORY: “Social Security benefits are financed primarily by payroll taxes on covered wages. The Federal Insurance Contributions Act (“FICA") imposes a tax on covered wages up to the taxable wage base of $106,800 in 2011, divided between employers (6.2%) and employees (6.2%). Self-employed taxpayers are subject to payroll tax under the Self-Employed Contributions Act (“SECA") on the same wage base with a rate equal to 12.4 percent (the total combined employer-employee rate). The wage base is adjusted annually based on average wage growth, if a Social Security cost-of-living adjustment is payable."
FACT: The share of total wages in the economy that are taxable for Social Security has declined from 90 percent in 1982 to about 82 percent today, because wages for high earners have grown more rapidly than wages of other earners. According to the 2011 Trustees’ Report : “The average annual rate of change in the ratio [of taxable earnings to covered earnings] was about -0.3 percent between 1983 and 2007. Most of this decline was due to a relative increase in wages for high earners."
REPUBLICAN ADVISORY: “According to the 2011 Annual Report of the Social Security Trustees, in calendar year 2010, Social Security non-interest income was $637.3 billion from payroll taxes and $22.7 billion from the taxation of benefits."
FACT: The Social Security Trust Fund contains $2.6 trillion in U.S. government bonds, purchased with contributions from taxpayers. These bonds, like all Treasury bonds, earn interest, which is another source of income to Social Security. In 2010, Social Security received $117.5 billion in interest earnings on its reserves - or 15 percent of the Trust Fund’s total income of $781.1 billion.
