In the New York Times, the Republican-Democratic duo talk up their plan to eliminate Social Security’s shortfall entirely through tax increases. A few things they didn’t have time to note:
— The top federal tax rate would jump from 37 percent to 49.4 percent.
— The top tax rate hasn’t risen that fast since the 1930s.
— The more a Social Security plan relies on taxes and the less it relies on benefit restraint, the worse the effects on economic growth.
— The cap on Social Security taxes is a common feature of advanced countries’ pension systems, and the U.S. one already taxes high-income earners more heavily than most countries do.
The senators feign (or maybe truly experience) bafflement at the idea that “a middle-class nurse pay[s] a larger share of her paycheck than a wealthy corporate lawyer” for Social Security. A few sentences later, they say how important it is to “safeguard Social Security’s earned-benefit structure.” They do not realize that the cap on Social Security taxes is part of that structure: Taxes are capped because benefits are. Having rich people pay more without getting higher benefits erodes that structure.
Really, the senators should have read my op-ed on this bad idea from last week before proposing it.