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?
“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,” Senator Bernie Sanders told a Senate hearing earlier this month. “It doesn’t make sense to me.”
Sanders and Senator 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 co-edits Inequality.org. His latest books include The Case for a Maximum Wage and The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970† Twitter: @Too_Much_Online.