How Does Rising Inequality Impact Social Security?

If you follow the news, you may be aware that there has been a rise in inequality in America over the last couple of decades. Every economic measure we have read has shown that there is now a tremendous gap between lower and middle-class wage earners and upper-class earners.

One thing you may not realize is that inequality has a direct effect on Social Security Disability Insurance (SSDI) and Social Security Income (SSI) funding. Recently, the Center for American Progress had an excellent report about how rising inequality had affected funding for both programs.

“Although productivity growth for American workers has more than doubled over the past two decades, incomes for the bottom 50 percent of workers have barely increased in inflation-adjusted terms, and they have actually declined for the bottom 20 percent,” the Center reported. “In short, most American workers have seen their wages decline or remain stagnant, while they have become twice as good at doing their jobs.”

How does this effect Social Security funding? “This growing divide in wages—combined with the fact that wages in excess of the taxable maximum are exempt from payroll taxes—means that millionaire and billionaire earners stop contributing to Social Security early in the year, while the average worker contributes all year long,” the Center reported.

Essentially, what the organization is saying is that some high-income earners are escaping taxation on wages earned past $118,500. With a rise in inequality (stagnant wages for the middle and lower classes), and the capped payroll tax, funding sources are decreasing.

“By virtue of the capped payroll tax, Social Security’s funding is directly tied to the full wages that low- and middle-income workers earn—but not to the full wages that higher-earning workers receive,” the Center reported.

We suggest visiting the source link at the bottom of this page for more information. There is a good report about the issue along with graphics. This is alarming news. Remember, economists have said that the SSDI program could run out of funds in late 2016, potentially resulting in a 20 percent payment cut to beneficiaries, unless alternative funding measures are implemented.

Helping You Obtain Social Security Benefits

We suggest continuing to follow our blog for more information about SSDI funding and the ongoing debate.

Our attorneys are dedicated to providing the disabled with legal services when it comes to collecting SSDI benefits. For more information about the SSDI application and appeals process, you can visit our Social Security FAQ page.

Troutman & Troutman, P.C. – Tulsa Social Security disability attorneys



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