JustFactsDaily.com addressed a GAO report requested by Democrat Presidential candidate Bernie Sanders.
At the request of Democratic presidential candidate Bernie Sanders, the U.S. Government Accountability Office (GAO) has published a study about the impact of life expectancy on Social Security benefits. As expected, GAO found that the shorter lifespans of low-income workers reduce the total amount of benefits they receive during retirement. Specifically, people with incomes of $20,000 per year receive “as much as 11 to 14 percent” less benefits “compared to what they would receive if they had an average life expectancy.”
Sanders is trumpeting these results to lobby for increasing benefits for low-income seniors and raising taxes on high-income workers. In every step of his argument, Sanders creates misleading impressions that fuel divisiveness among Americans.
But the article points out two economic realities proving Sanders is wrong:
Sanders’ most glaring lapse is his failure to mention that low-income workers receive far higher annual returns on the taxes they pay into Social Security. For example, a person who works for 44 years and earns $20,000/year will receive annual Social Security benefits equal to 11.3% of his lifetime payroll taxes. In contrast, a person who earns $80,000/year will receive only 6.5%. In other words, the low-income worker receives 1.7 times the annual return of the high-income worker.
More importantly, low-income workers are eligible for the earned income tax credit, which “offsets much of the impact of Social Security taxes paid by low-income workers,” as explained by GAO. During 2015, 27.5 million taxpayers received $66.7 billion in earned income tax credits. This is an average payment of $2,425 per recipient. Given that workers who earn $20,000/year pay $2,480 per year in Social Security taxes, the earned income tax credit can effectively reduce their Social Security taxes to little or nothing.