What The Washington Post Misses About Social Security’s Progressivity

In a recent piece, The Washington Post editorial board published a misleading statistic: that 37 percent of Social Security benefits go to senior households with incomes over $100,000. This statistic is meant to show that Social Security is too generous to high-income households. However, the statistic, by itself, does not show this and could lead others to the mistaken conclusion that Social Security benefits are not progressive. When properly measured, consistent with how we assess progressivity in taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. policy, Social Security benefits are progressive.

In tax policy, it is standard to use two distinct, but related, concepts to describe the structure of a tax code: how progressive it is and how redistributive it is. Progressivity describes how taxes paid as a share of total income rise with income. How redistributive a tax system is depends on how much it reduces inequality and is a function of how progressive it is and how much revenue it raises.

Although distinct concepts, they are often mistakenly used interchangeably. The US tax system is highly progressive, as high earners pay a higher share of their income in taxes compared to lower earners. However, the US tax system is not as redistributive compared to some other nations because it does not raise as much revenue as a share of total income. Tax changes can raise progressivity with little impact on redistribution (and vice versa). For example, raising one more dollar from the richest person in the US would make the US tax system more progressive, but it would have little impact on how redistributive it is.

The “37 percent” statistic cited by The Washington Post tells us neither how progressive nor how redistributive Social Security benefits are. Without knowing the total income of those recipients, we are unable to draw any conclusions about how progressive the Social Security system is. Similarly, without knowing the total expenditures of the program, we are unable to draw any conclusions about how redistributive the overall program is.

To illustrate why, consider a scenario of 100 households (see Table 1). Sixty-five households earn $40,000 and receive $20,000 in Social Security benefits. The remaining 35 households receive $40,000 from Social Security and $75,000 from other sources for a total household income of $115,000. The 35 percent of households earning more than $100,000 receive 51 percent of all benefits. However, Social Security only represents 35 percent of their total income. In comparison, Social Security benefits make up 50 percent of low-income household income. In short, this distribution of benefits is actually progressive because benefits make up a larger share of low-income household total income.

Table 1. Share of Total Benefits Is Not a Measure of Progressivity

In contrast to what the “37 percent” statistic suggests, Social Security benefits are quite progressive. This is because their share of lifetime income falls as lifetime earnings rise. Benefits are calculated based on the average wage-indexed monthly earnings over a retiree’s career, based on the individual’s 35 highest earning years. The system is designed to replace a higher share of this income in retirement for low earners compared to high earners. For example, Social Security benefits will replace 90 percent of the first $1,286 of a worker’s average monthly earnings in retirement. The replacement rate falls to 32 percent for the next $6,463 in earnings, and falls to 15 percent for the remaining earnings in excess of that amount, up to the taxable maximum.

This benefit formula means that higher earners will receive a smaller share of lifetime income in benefits. According to a 2024 Congressional Budget Office (CBO) analysis, benefits account for about 29 percent of a low-income household’s lifetime income, while benefits only account for about 7 percent of a high-income household’s lifetime income. Furthermore, high-income households will pay more in income taxes on those benefits, as filers with incomes under $32,000 face no income tax on their benefits, whereas up to 85 percent of benefits are taxable for earners above that threshold.

The net progressivity of the Social Security program is more complex. The payroll taxes people pay to finance the program are regressive: payroll taxes fall as a share of income as income rises. Furthermore, taxes paid and benefits received over a lifetime can depend on a number of demographic factors. That said, the CBO analysis finds that lifetime benefit-to-tax ratios are higher for low-income households. The lowest quintile households receive 2.5 times as much benefits as they pay in taxes, while the highest income quintile receives roughly the same amount of benefits as they pay in taxes.

The question of redistribution is even more complex. One paper found that Social Security cuts the lifetime Gini coefficient, a measure of economic inequality, by about 1.8 points when people are ranked by their own realized earnings. When measured this way, Social Security will appear to redistribute significantly due to the presence of low-earning or no-earning spouses in households. But looking at household “potential” earnings, accounting for pooled resources and non-market production that does not show up in the aggregate data, rather than individual realized earnings, changes the picture: the Gini coefficient declines by just 0.2 points.

Social Security faces a structural deficit and will require some combination of tax increases or spending reductions to be sustainable in the long run. Lawmakers may ultimately decide that benefits are too generous for high-income retirees. However, they should make that decision with a clear view of how the current system is actually structured, not a view marred by misconceptions.