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Thursday, April 18, 2013

NY Times Debate: Should Social Security Taxes Affect All Wages?

Room for Debate New York Times, Should Social Security Taxes Affect All Wages?:

As he tries to reach a broad agreement with Congress on taxes and spending, President Obama has raised the possibility of cutting Social Security benefits. But a Congressional Budget Office report has said that Social Security’s financial problems could be resolved if we eliminated the cap on income that is taxed for the program (currently $113,700 a year), without raising the limit on benefits.

Is that the fairest way to solve Social Security’s problems?

  • Andrew G. Biggs (American Enterprise Institute), Don’t Raise or Eliminate the Cap:  "Eliminating the cap would make Social Security a welfare plan; and raising it would hurt the economy and do nothing to put the budget on a sustainable track."
  • Heather Boushey (Center for American Progress), An Affordable Step for a Vital Program:  "With incomes stagnant and the middle class needing economic stability, debate on Social Security must include lifting the earnings cap."
  • Dorothy A. Brown (Emory), The Only Path for Elderly Citizens:  "Social Security keeps more than 21 million seniors out of poverty each year. Don't cut their benefits, repeal the wage cap."
  • Theda Skocpol (Harvard), Tap the Wealthy to Support a Program for All:  "High earners like me stop paying Social Security taxes in the spring. We should pay on all our salary like most employed Americans."
  • C. Eugene Steuerle (Urban Institute), A Modest Rise Is Fine, but It’s Not a Panacea:  "Social Security actuaries say that even with a benefit cap eliminating the tax cap wouldn't end the program's deficit."
  • James Lee Wetzler (Former Tax Commissioner, New York State; Former Deputy Chief of STaff, Joint Committee on Taxation), More Revenue, but Less Political Support:  "For the first time, some, including influential opinion leaders, would get a bad return on what they pay into Social Security."

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Comments

It's so simple: Increase the marginal tax rate by 12.4% on high earners who already faced combined rates approaching or exceeding 50% and who have ample options to work fewer hours or retire early. Or they can increase the price for their services to cover the new tax.

This sounds like a foolproof plan. What could possibly go wrong?

Posted by: AMTbuff | Apr 18, 2013 1:04:43 PM

So the proposal is that people who earn more would pay more for the same benefit? Already social security pays relatively less to high earneres than to low earners. And this is a good solution why? To make it clear that that the payment to the non-high earners is welfare? To increase dissatisfaction with social security?

Since future SSI payments will come from redeeming funds loaned to fund govm't payments, why not be honest and just jack up the income tax rates?

Posted by: air65cav | Apr 18, 2013 1:36:59 PM

Social Security is part retirement plan and part welfare plan. But, most importantly, it is a vehicle for wealth distribution, and being such, there's no reason some of he wealth shouldn't be redistributed (stolen) from those who have it, as Willie Sutton would say.

A working young man who marries and divorces 5 indolent young foreign women, in series, each for a 10-year period will be oh-so-appreciated by each of them in turn, each of which will gain half his SS benefit allotment for life after 67, and all of his benefit allotment if and when he should die.

What a country!

Posted by: Jimbino | Apr 18, 2013 9:13:03 PM