Editing Social Security (United States) (section)

=== Discrimination against the poor and the middle class ===
[[File:Social Security Benefits by Income Quintile.jpg|thumb|upright=1.6|For people in the bottom fifth of the earnings distribution, the ratio of benefits to taxes is almost three times as high as it is for those in the top fifth.<ref name="CBO 18266" />]]

Workers must pay 12.4 percent, including a 6.2 percent employer contribution, on their wages below the [[Social Security Wage Base]] ($168,600 in 2024), but no tax on income in excess of this amount.<ref name="SSA-CBB" /><ref>{{cite web | title=Perspectives | url=http://www.nysscpa.org/cpajournal/2005/405/perspectives/p17.htm | access-date=2009-05-21 | publisher=New York State Society of Certified Public Accountants}}</ref> Therefore, high earners pay a lower percentage of their total income because of the income caps; because of this, and the fact there is no tax on [[unearned income]], social security taxes are often viewed as being [[regressive tax|regressive]]. However, benefits are adjusted to be significantly more progressive, even when accounting for differences in life expectancy. According to the non-partisan Congressional Budget Office, for people in the bottom fifth of the earnings distribution, the ratio of benefits to taxes is almost three times as high as it is for those in the top fifth.<ref name="CBO 18266">{{cite web | url=http://www.cbo.gov/publication/18266 | title=Is Social Security Progressive? | publisher=The US Congressional Budget Office (CBO) | date=2006-12-15 | access-date=2014-02-08}}</ref>

Despite its regressive tax rate, Social Security benefits are calculated using a progressive benefit formula that replaces a much higher percentage of low-income workers' pre-retirement income than that of higher-income workers (although these low-income workers pay a higher percentage of their pre-retirement income).<ref>Social Security's benefit formula provides 90% of average indexed monthly earnings (AIME) below the first "bend point", 32% of AIME between the first and second bend points, and 15% of AIME in excess of the second bend point. {{cite web | url=http://www.ssa.gov/OACT/COLA/piaformula.html | title=Primary Insurance Amount | publisher=Social Security Administration}}</ref> Supporters of the current system also point to numerous studies that show that, relative to high-income workers, Social Security disability and survivor benefits paid on behalf of low-income workers more than offset any retirement benefits that may be lost because of shorter life expectancy (this offset would apply only at a population level).<ref>{{cite report | first=Cynthia M. | last=Fagnoni | title=Social Security and Minorities: Current Benefits and Implications of Reform | type=Testimony before the Subcommittee on Social Security, Committee on Ways and Means, House of Representatives| date=February 10, 1999}}</ref><ref>{{cite magazine | first1=Alexa A. | last1=Hendley | first2=Natasha F. | last2=Bilimoria | publisher=Social Security Administration | title=Minorities and Social Security: An Analysis of Racial and Ethnic Differences in the Current Program | magazine=Social Security Bulletin | volume=62 | number=2 | date=1999 | pages=59–64}}</ref><ref>General Accounting Office, "Social Security and Minorities: Earnings, Disability Incidence, and Mortality Are Key Factors That Influence Taxes Paid and Benefits Received", Report to the Ranking Minority Member, Subcommittee on Social Security, Committee on Ways and Means, House of Representatives, April 2003.</ref> Other research asserts that survivor benefits, allegedly an offset, actually exacerbate the problem because survivor benefits are denied to single individuals, including widow(er)s married fewer than nine months (except in certain situations),<ref>{{cite web | url=https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300207001!opendocument#c2 | title=POMS RS 00207.001.C2 | publisher=[[Social Security Administration]] | access-date=2009-05-21 | archive-url=https://web.archive.org/web/20110721080405/https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300207001!opendocument#c2 | archive-date=2011-07-21 | url-status=dead}}</ref> divorced widow(er)s married fewer than ten years,<ref>{{cite web | url=https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300207001!opendocument#a2 | title=POMS RS 00207.001.A2 | publisher=[[Social Security Administration]] | access-date=2009-05-21 | archive-url=https://web.archive.org/web/20110721080405/https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300207001!opendocument#a2 | archive-date=2011-07-21 | url-status=dead}}</ref> and co-habiting or same-sex couples, unless they are legally married in their state of residence.<ref>{{cite web | url=http://www.cato.org/testimony/ct-mt051705.html | title=Testimony | publisher=[[Cato Institute]] | date=2005-05-17 | archive-url=https://web.archive.org/web/20050527062012/http://www.cato.org/testimony/ct-mt051705.html | archive-date=2005-05-27 | access-date=2016-06-28}}</ref><ref>{{cite web | url=https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300207001!opendocument#c1 | title=POMS RS 00207.001.C1 | publisher=[[Social Security Administration]] | access-date=2009-05-21 | archive-url=https://web.archive.org/web/20110721080405/https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300207001!opendocument#c1 | archive-date=2011-07-21 | url-status=dead | df=mdy-all}}</ref><ref name="DePaulo Morris 2006">{{cite journal | last1=DePaulo | first1=Bella M. | last2=Morris | first2=Wendy L. | date=2006 | title=The Unrecognized Stereotyping and Discrimination Against Singles | journal=Current Directions in Psychological Science | volume=15 | number=5 | pages=251–254| doi=10.1111/j.1467-8721.2006.00446.x }}</ref><ref name="Steuerle Carasso 2016">{{Cite journal | last1=Steuerle | first1=C. Eugene | last2=Carasso | first2=Adam | date=2016-06-04 | title=Social Security Benefits and the Language of Guarantees | url=https://www.urban.org/research/publication/social-security-benefits-and-language-guarantees | access-date=2021-07-27 | journal=Urban Institute | language=en}}</ref><ref>{{cite web | last=Oberwetter | first=Brooke | date=2005-06-13 | url=http://www.reason.com/news/show/32932.html | title=Show | work=[[Reason (magazine)|Reason]] | access-date=2009-05-21}}</ref> Unmarried individuals and minorities tend to be less wealthy.<ref>{{Cite news | url=https://money.cnn.com/2006/01/18/pf/marriage_wealth/index.htm | title=Marriage Wealth | work=[[Money (magazine)|Money]] | date=2006-01-18 | access-date=2009-05-21}}</ref>

Social Security's benefit formula provides 90% of average indexed monthly earnings (AIME) below the first "bend point" of $791/month, 32% of AIME between the first and second bend points $791 to $4781/month, and 15% of AIME in excess of the second bend point up to the Ceiling cap of $113,700 in 2013.<ref>{{cite web | title=Social Security Benefit–PIA Calculation | url=http://www.ssa.gov/OACT/COLA/piaformula.html | access-date=April 1, 2012}}</ref> The low income bias of the benefit calculation means that a lower paid worker receives a much higher percentage of his or her salary in benefit payments than higher paid workers. A married low salaried worker can receive over 100% of their salary in benefits after retiring at the full retirement age. High-salaried workers receive 43% or less of their salary in benefits despite having paid into the "system" at the same rate (see benefit calculations above). To minimize the impact of Social Security taxes on low salaried workers the [[Earned income tax credit|Earned Income Tax Credit]] and the Child Care Tax Credit were passed by the U.S. Congress, which largely refund the FICA and or SECA payments of low-salaried workers through the income tax system.<ref name="CBO 43373 table 1" /> By Congressional Budget Office (CBO) calculations, the lowest income quintile (0–20%) and second quintile (21–40%) of households in the U.S., pay an average federal income tax of −9.3% and −2.6% of income and Social Security taxes of 8.3% and 7.9% of income respectively. By CBO calculations, the household incomes in the first and second quintiles have an average total federal tax rate of 1.0% and 3.8% respectively.<ref name="CBO 43373 table 1" /> However, these groups also have the smallest percentage of American household incomes{{snd}}the first quintile earns 3.2% of all income, while the second quintile earns 8.4% of all income.<ref name="CRSIncome">{{cite web | url=https://fas.org/sgp/crs/misc/R42400.pdf | archive-url=https://web.archive.org/web/20120323213536/http://www.fas.org/sgp/crs/misc/R42400.pdf | archive-date=2012-03-23 | url-status=live | title=The U.S. Income Distribution and Mobility: Trends and International Comparisons | publisher=[[Congressional Research Service]] | via=[[Federation of American Scientists]]}}</ref> Higher-income retirees pay income taxes on 85% of their Social Security benefits and 100% on all other retirement benefits they may have.<ref name="SSA EN-05-10070" />