Lift the Social Security Cap -- It Won't Hurt, But It Will Help

It's about time somebody addressed this basic and very important solution.

A moderate increase on the wage cap would address Social Security's pending-but-not-desperate solvency issues and render the program viable for the long term.

This information has been available for some time now -- yet the media has chosen to ignore it.

Thus allowing Hillary to get away with her Pennsylvania debate statement that there are 'more progressive solutions' to deal with Social Security's long-term funding issues.

Presumably including, as stated on her website, 401(k) plans for all -- something that sounds suspiciously like Chimperor's privatization scheme.

Perhaps the media could next quiz Ms. Clinton on exactly what her definition of 'progressive' includes -- in between debate over her jewelry choices?

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The cap could correspond to whatever the first cutoff for Social Security taxes turn out to be. Suppose that someone isn't subject to Social Security taxes between $110K and $200K. Their benefit would be capped at whatever the benefit level would be at whatever the "first cutoff" is when they retire.

People also forget that the level of income subject to Social Security taxes increases every year, so eventually the level of income subject to SS tax will converge with the higher income threshhold where SS tax kicks in unless BOTH are changed annually. If that's the case, there will be a liability for people who didn't pay SS tax on the gap between $110K and $200K, but might not have paid enough tax to support their level of entitlement.

I'd like to see 401(k) limits at least doubled.

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First SS tax is a scam.. Self employes pay it twice..employed pays only once.. It makes no sense at all. Risk everything only to have the democrats take it and give it to someone else, who maybe isn't even an American.

The plan to leave the cap from $97K to $200K thousand is sound though. But when Obama and Hillary talk of hard working families I question their definition..Do they mean people that work 50 hour weeks and make ends meet..Or does that include people like me, self employed working maybe 80 hour weeks and do a little better..

They both are out of touch with reality because they both have more money than they know what to do with (especially Hillary)and they can't relate with "hard working" people!

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Crikey, where to start? Let’s see:

“This is no radical or hare-brained idea. It has the endorsement of the AARP, the largest seniors' lobby.” Leaving aside the probably unintentional humor in this statement, the Obama proposal to effectively eliminate the payroll tax cap isn’t supported by AARP. They’ve supported lifting the cap to cover around 90% of total wages (the coverage after the 1983 reforms), which would mean raising the cap from $102,000 to around $180,000. As far as I know, they oppose eliminating the cap entirely because it would turn Social Security too far away from its roots as a ‘social insurance’ program that balanced adequacy with equity and toward a ‘welfare program’ that focused only on adequacy.

“Some 90% of wages fell below the cap in 1983. Today, with the increased concentration of income among the highest-paid, that figure is down to 84%.” Ok, then propose raising the cap up to cover 90% of wages again. Why should it cover 100% of wages, when it never has before? Maybe Roosevelt knew something about the political dynamic that keeps a program like Social Security political sustainable.

“Lifting the wage cap on Social Security taxes would not do much more than reverse those tax giveaways to the wealthy.” Let’s see – the Bush tax cuts reduced the top marginal tax rate from 39.6% to 35.0%, a reduction of 4.6%. Eliminating the cap will raise the top marginal rate by 12.4%, almost three times higher.

“For starters, lifting the cap affects just 5.9% of wage-earners.” It’s 5.9% of earners in any given year, but they’re not the same ones every year. Over the course of their lifetimes, over 20% of workers have at least some earnings above the cap and so would be affected.

Overall, you seem to have a good understanding of how Social Security has worked historically, by design as a mildly redistributive plan that combined a lot of forced saving with a bit of redistribution. If you want to change Social Security to something much more progressive that’s fine, but you haven’t really made a case for such a big change.

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The points made far outweigh the negatives. The fact is that most households that have incomes that exceed the SSI Tax pay it anyway because they are two income households so that each earner must pay on all their earnings.

Thank God for an article that takes the argument forward instead of looking for a place to retreat. I'm tired of articles that take the position of surrender before the first shot has been fired.

Progressives and Liberals must move the ball forward, not punt every time they face the injustice of a plutocracy that will take everything they have given the chance.

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