During the last two decades that I worked as a superintendent of schools, I received a pay increase around this time of year. The increase didn’t require any action by the school boards I worked for, nor was it related to my job performance.
The first time I noticed this November pay increase, in the late 1980s, I called the payroll department and reported what I thought was a computer glitch: The program failed to deduct my Social Security payment. I was stunned to learn that there was no mistake. Because my wages exceeded the Social Security wage base for that year, I wouldn’t have Social Security deducted for the rest of the year. I had, in effect, received a “raise” of 6.2% from November onward because I was highly compensated.
This feature of Social Security was news to me and, based on informal conversations with friends and family members, I found that many of them were unaware of this as well. Indeed, it’s possible many readers may not realize that those earning more than $132,900 in 2019 will receive a 6.2% raise at some point during the year.
When I was working, my “raises” came relatively late in the calendar year. However, those in the top 1% — earning in excess of roughly $425,000 a year in 2019 — received their pay raise in mid-April. Those earning more than $1 million received their raise in early February. And the multimillionaires? They could have gotten their raise by the end of the first week of January.
The last year I worked, my “raise” amounted to roughly $1,700. It was helpful, to be sure, when I shopped for Christmas gifts for my grandchildren or sifted through the stack of appeals I received from nonprofit groups. But it was relatively inconsequential in terms of my total compensation. However, those in the top 1% received a raise that was 10 times as much; million-dollar wage earners received in excess of $50,000, and the top wage earners — a lot more.
I’ve read recently that a number of lawmakers are concerned about a ballooning deficit that can be closed only by spending cuts. These fiscal conservatives advocate reducing “government entitlements” like Medicaid, Medicare, unemployment and welfare programs and — wait for it — Social Security. They express especially dire concern about Social Security’s projected bankruptcy, which is forecast to occur in 2035. Yet this so-called crisis could be resolved for decades by collecting the Social Security payroll tax on all the wages highly compensated individuals receive — that is, by eliminating the “raise.”
According to the Congressional Research Service, if all wage earnings were taxed and future Social Security benefits were calculated based on the current formulas, the Social Security trust fund would remain solvent through 2080. If the solvency of Social Security is a “crisis,” there is an easy solution: Require that the Social Security wage tax be applied to all earnings. And here’s the good news for politicians: This would affect only 5% of the wage earners in the country.
I can’t speak for others who were in higher income brackets from 1988 through 2011, but I would have been willing to forgo the relatively modest pay raise I received during that time. This was especially true when debates about the solvency of Social Security emerged in the late 1990s and I began to hear my children, now in the workforce, bemoaning the “fact” that they would never collect Social Security.
I understand the counterarguments. There is a cap on the amount Social Security will pay to any individual, which means that the highest wage earners are unlikely to collect on the 6.2% they contribute on their earnings beyond the Social Security wage base. I also acknowledge that many of the highest wage earners would have less available for philanthropic donations if 6.2% of their earnings “went to the government.” But from my perspective it is crucial that we fully fund a system that has worked for decades, a system that helps ensure that every wage earner can retire with dignity.
I believe Congress would find that a majority of the highly compensated wage earners would be willing to make a small sacrifice today to help the generations of senior citizens in the future. By doing so, those who are doing well would not only provide economic security for future generations, they might also help restore the belief that our government can work to help all its citizens.
Wayne Gersen lives in Etna.