Gallup: How To Save Social Security? Remove The Cap!
By Justin Gardner | Related entries in Money, Social Programs, Social SecurityIf you’re lucky enough to earn a lot of income, you knew this was coming. After all, you only get taxed for Social Security on the first $106,800 of your income. Anything after that draws no SS tax.
So, basically, while the rest of us get taxed on our entire income, you all pay into the system for only a very small portion of your income.
Many on the right have suggested that this would amount to the largest tax increase in history. However, it’s a hollow argument.
Let’s just look at recent history. In 1992, the top tax bracket was 31%. That increased to 39.6% from 1993 to 2001. So that’s clearly an 8.6% hike. Know the percentage that’s taken out of your check for SS? 6.2%. Pretty simple math there.
And given that Americans value folks who’ve worked hard their entire lives and should have a social safety net, they want the rich to pay their fair share.
My guess is that when Social Security reform rolls around in 2013, and if Obama is elected, he’ll propose two changes. First, no more cap. Second, raise the retirement age to 60. These solutions will keep this program solvent forever. If Romney is elected, there will be no reform because he’ll seek to privatize the system and nobody’s going to go for that given the volatility in the stock market, not only in this country but elsewhere.
So, if you’re rich you have to ask yourself…is this fair? Personally, I think the cap has always been unfair, but I’d love to hear your thoughts. But before you libertarians and conservatives serve up the same arguments, let’s please just take a deep breath and realize that folks who are rich will undoubtedly stay that way even with this tax increase. They’ll just have a little less disposable income. That is literally the net effect of this. Few would move out of the country as a result of this because every other prosperous nation that you’d want to live in has similar policies.
But yes, if somebody wants to become a resident of a weird island nation that has almost no taxes, go for it. And they can suffer the scorn of everybody and isolate themselves.
So, to me, this seems like a small price to pay to make sure the other 94% have the safety net we desperately need.
But wait, there’s more!
Another graph. This one shows the number of taxpayers who are above the cap and their earnings.
Basically, the rich have been gaining more and more income, as a percentage of the whole, than the rest of us. That’s not to demonize them and, by the way, well done! You’ve figured it out. *golf clap*
But the rest of us need a backup plan and you can give up some more to make sure we’re all safe and sound.
This entry was posted on Thursday, July 29th, 2010 and is filed under Money, Social Programs, Social Security. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
July 30th, 2010 at 6:04 am
OK, here are my thoughts.
When FDR crafted Social Security, he knew it would be unpopular if the Rockerfellers in the world got a big check alongside John Q. Public. Everybody who pays into SS gets a benefit proportional to what is paid in; thus, by placing an income cap, SS also caps the benefit.
Social Security is that rare federal program where everybody receives a benefit and for richer Americans, that benefit is capped. What you (and a majority) is proposing is to fundamentally change the structure of Social Security from a retirement program to a welfare program. That is, you want to take more taxes from richer Americans but NOT increase the proportional benefit.
FDR didn’t want this and neither should America.
(P.S. – You meant to write “raise the retirement age to 70.” Not 60.
July 30th, 2010 at 7:40 am
@Eric: true that it changes the principles of the program to add a transfer component, but I think most people are OK with that (I am). It’s a rather abstract concern, versus the very practical issue of the long-term shortfall.
But I’m vigorously opposed to the second most popular item, the means-testing. Cutting benefits to those people who manage their money carefully is a ridiculous idea. It’s literally a disincentive to save your own money for retirement, which would have terrible effects if introduced.
July 31st, 2010 at 6:51 pm
But this would hurt the oligarchy, so I oppose it.
August 1st, 2010 at 12:18 am
I’ve been presuming for some time that removing the cap and raising retirement age would be among the most viable ideas. I think that both of these can be gotten away with, despite a LOT of grumbling.
Means testing would be a much harder sell, and likely to turn shrewd middle class Americans against the government, for the reason Milo cites.
January 12th, 2011 at 2:06 pm
Remove the cap! Please. Why let the rich get richer and the poor get poorer? That makes no sense.