In one of his last acts as president, Joe Biden signed into law the Social Security Fairness Act of 2023 (H.R.82). The legislation expands Social Security by repealing “provisions that reduce Social Security benefits for individuals who receive other benefits, such as a pension from a state or local government.” A White House official said that signing the legislation made Biden “the first president in twenty years to expand Social Security benefits.”
This expansion of Social Security shows the true nature of the Social Security system.
The Social Security Fairness Act amends title II of the Social Security Act to eliminate the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) that reduce Social Security benefits for individuals who also receive a pension from an employer that did not withhold Social Security taxes.
According to the Congressional Budget Office (CBO):
The WEP reduces benefits for retired or disabled workers who have fewer than 30 years of employment covered by Social Security if they also receive pensions based on noncovered employment. The GPO reduces the spousal or surviving spousal benefits of people who receive pensions based on noncovered employment.
The changes are effective for benefits payable after December 2023.
Although the CBO projects that the Social Security Fairness Act will cost over $200 billion over the next 10 years, the legislation passed with overwhelming Democratic support and majority Republican support. It passed the House in November by a vote of 327–75, with only four Democrats casting a no vote. It passed the Senate in December by a vote of 76–20 vote, with Republicans casting all of the no votes. “The Senate finally corrects a 50-year mistake,” proclaimed Senate Majority Leader Chuck Schumer (D-NY) upon Senate passage. President Biden signed the bill into law on January 5 and said, “By signing this bill, we’re extending Social Security benefits for millions of teachers, nurses and other public employees and their spouses and survivors.”
The National Association of Police Organizations (NAPO), the International Association of Fire Fighters (IAFF), and the “nonpartisan” Senior Citizens League (TSCL) all pushed for the legislation.
According to former Ohio senator Sherrod Brown, “Social Security is a bedrock of our middle class. You pay into it for 40 quarters, you earned it, it should be there when you retire. All these workers are asking for is for what they earned.”
But is this so?
Social Security is funded by a 12.4 percent payroll tax (split equally between employers and employees) on the first $176,100 of employee income. Self-employed persons pay the full 12.4 percent tax but receive both a reduction in their net earnings from self-employment and a tax deduction equal to 50 percent of the amount of the Social Security tax they paid. One must pay Social Security taxes for a minimum of 40 quarters (10 years) to be eligible for benefits, but benefits are not based on the amount of Social Security taxes paid. They are based on one’s Primary Insurance Amount (PIA): the average of a worker’s 35 highest years of earnings (up to a particular year’s wage base), adjusted for inflation. This is an arbitrary formula, loosely based on one earnings, that Congress can change at any time. From the very beginning, there has been no connection between the taxes one pays into the Social Security system and the benefits that one receives from Social Security. Congress can legally cut benefits at any time regardless of how much a retiree has paid into the program.
Yet, most Americans would agree with now former senator Brown. They think they are entitled to Social Security because they have earned it by paying into the system their entire working lives.
The expansion of Social Security shows the true nature of the Social Security system. Retirees who receive a public pension (many state and local government employees) will get a permanent and substantial increase in their Social Security benefits without any change in the amount of Social Security taxes that they paid.
When the employee share of Social Security taxes was lowered from 6.2 to 4.2 percent for two years (2011–2012), it had no effect on the Social Security benefits that any American will receive. Retirees will not receive a smaller amount because their taxes went down for those two years.
Up to 85 percent of Social Security benefits are subject to federal income taxation if one’s income level is over $34,000 ($44,000 for couples). (Income is defined as adjusted gross income + nontaxable interest + half of Social Security benefits.) Thirteen states also tax Social Security benefits. But if Americans are entitled to Social Security benefits because it is “their money” and they “earned it” because they paid into the system their whole working lives, then why are their benefits subject to taxation?
Since 1975, the Social Security Administration (SSA) has based annual benefit increases (cost-of-living adjustments, or COLAs) on related increases in the Consumer Price Index. Yet, the Social Security tax rate has held steady at 12.4 percent since 1990. This shows again that there is no connection between taxes paid and benefits received.
The conclusion is inescapable: Social Security is a welfare program just like Medicaid, TANF, food stamps, WIC, Section 8 housing vouchers, SSI, free school lunches, and refundable tax credits. It is an intergenerational, income-transfer, wealth-redistribution scheme that takes money from those who work and gives it to those who don’t.
