Ending Hunger in America, 2014 Hunger Report Full Report | Page 121

CHAPTER 3
could pay out the full benefit for the next 20 years and 75 percent after that.104 Maintaining
Social Security benefits at their current level indefinitely would require minor changes to the
financing structure. Social Security is financed through a payroll tax on earned income. The
amount of earnings subject to the tax is $113,700, so the simplest thing to do would be to raise
the income threshold that determines how much of one’s income is subject to the tax. Raising
it above the current $113,700 would have no effect on the 95
percent of American workers who earn less than that.105
“Maintaining Social
The alternative often discussed is means-testing the proSecurity benefits at
gram, which means cutting benefits to affluent seniors to
their current level
ensure that benefit levels can be maintained for low-income
indefinitely would
seniors. The problem here is that there are so few seniors
require minor changes
who could accurately
to the financing
be described as affluent.
structure.”
Seniors with incomes of
more than $130,000 per year are just 1.2 percent of all
Social Security beneficiaries. Means-testing that started
with seniors whose annual income exceeds $100,000
would yield just 2.3 percent of savings to the program.106 Under this plan, benefit reductions would have
to be phased in starting with incomes much lower than
$100,000. A sharp cut in benefits that simply kicked in at
income of $100,000 would no doubt create some incentive to use accounting gimmicks to reduce the amount
of a person’s income that is subject to Social Security
taxes. At what point, then, should means-testing start?
$80,000? $60,000? $50,000? Many people would not
consider $50,000 to be affluent. Means-testing the program would also increase its administrative costs. The
beauty of the program currently is that it costs almost
nothing to administer.107 Based on the administrative
costs incurred in the disability program, where there
is means-testing, one would expect to see expenses
increase by 1.7 percent of the program’s costs.108
Rather than cutting Social Security, we should
be talking about increasing the benefits. In 2012, the
average annual Social Security benefit was less than
$15,000.109 When the program was created, the Social
Security Administration described it as one leg of a
three-legged stool.110 The other two legs were definedbenefit pension plans and household savings. Today,
the majority of retired people rely on Social Security as
their main source of income, and for two in every five
seniors, Social Security is the source of more than 80
percent of their retirement income.111 See Figure 3.12.
www.bread.org/institute?

Seniors who receive
SNAP benefits are eligible
for a medical expense
deduction but most are
not aware of it when they
apply for SNAP.

Richard Lord

? 2014 Hunger Report? 111

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