According to the Social Security Trustees, the combined Old-Age Survivors and Disability Insurance Social Security Trust Funds will be able to pay full benefits until 2034, and incoming payroll taxes will be sufficient to pay about 78 percent of benefits thereafter. Some are using this modest gap in long-term funding as a pretext to justify proposals for large cuts in Social Security benefits destined to reduce the federal deficit. One option being discussed would reduce or eliminate Social Security benefits for moderate to higher-income individuals – that is, means-testing Social Security. The National Committee to Preserve Social Security and Medicare opposes such proposals and believes their adoption would break faith with American workers.
Social Security was created as an earned right whose benefits upon retirement are determined by the contributions made during a person’s working career. The relationship between earnings and benefits is a fundamental feature of the program that distinguishes it from welfare programs and other non-earned entitlements. Means-testing Social Security would break this historic relationship and convert the program into a welfare program.
Those who would means-test Social Security argue that eliminating Social Security benefits for more affluent Americans is an appropriate option for reducing the program’s costs. Of course, very wealthy Americans can go without Social Security, and in fact there is no law that forces anyone to claim their benefits. However, the wealthy only make up an extremely small portion of the American population. Disqualifying them from receiving Social Security will have little impact on Social Security’s solvency. It would, however, take away a benefit they have paid for and earned during their working lives, the same as all other workers.
To make a significant change in Social Security’s finances, it would be necessary to begin phasing out benefits for people with very modest incomes, in the range of $60,000-$70,000 annually – hardly wealthy in anyone’s book. In fact, a recent means-test proposal recommended by proponents of means-testing would have reduced Social Security benefits for people with average annual earnings of only $49,000.
Social Security is a progressive benefit, which means that higher-income workers already receive proportionately lower benefits for their contributions than those who have lower lifetime earnings. In addition, beneficiaries with income over $25,000 annually pay taxes on a portion of their Social Security benefits. This additional tax was originally intended only to affect the wealthiest beneficiaries, much like the argument currently made for means-testing the program.
Americans understand that Social Security is their money, not the government’s, and they hold that view irrespective of their political affiliation or their financial situation at retirement. Means-testing Social Security would break faith with the American worker, would be unfair and would undermine public support for the program.
While some find it easy to say that wealthier individuals should not receive Social Security because they do not need the income in retirement, means-testing the program is much more complicated and could result in a fundamental transformation of Social Security as we know it. It would no longer be an earned right, and the benefit would no longer be related to contributions.
Despite the impression left by some, the average Social Security retirement benefit today is modest – only about $19,884 per year. Cutting these benefits, no matter how it is accomplished, should be the last place Congress looks for budget savings.
Government Relations and Policy, January 2022