Left-wingers present raising taxes on the rich as a simple solution to Social Security’s problems.
Max Richtman, the head of the “National Committee to Preserve Social Security and Medicare” — which are in no danger of extinction — writes to dispute my views on the first program. I’ll take it line by line.
Social Security used to capture revenue from about 92 percent of taxable earnings, but the current payroll wage cap ($184,500 annually) now includes only about 82 percent of the nation’s eligible earnings. The wealthy are paying proportionally less, depriving Social Security of much-needed revenue.
As Richtman’s own source notes, the last time that number hit 92 percent was 1940. The average percentage over the program’s history, again according to that source, has been 83 percent: about what it is now.
It is only right that the wealthy — many of whom benefit from the labor of American workers — make an equitable contribution to the nation’s retirement security system, especially in light of vanishing employer-provided pensions.
People will disagree about whether jacking up the taxes of the wealthy further is “equitable,” and those who say no will not be persuaded by Richtman’s mere assertion that it is. What the reduction of defined-benefit pension plans has to do with the question is unclear, but the nation’s seniors — in part because of defined-benefit plans — never have been better off than they are today.
Ramesh Ponnuru suggested limiting (or means testing) Social Security benefits for higher earners instead. This not only would rend the earned benefit nature of Social Security,
This is such a strange feature of left-wing thought about Social Security. Lower benefits for people with high lifetime earnings would destroy the program’s earned-benefit structure . . . but somehow higher taxes, with no additional benefits for the taxed, wouldn’t?
it also wouldn’t yield sufficient savings to restore the system to long-term solvency. (Benefits for middle-class workers would have to be capped, too.)
The link provided analyzes a form of means-testing that is pretty far from what I favor. But no matter: I never said that limiting benefit increases for the highest earners would make the program fully solvent. I think that limits in benefit increases for middle-class workers — looser limits than for the highest earners — should also be part of a plan to reform the program. At the same time, benefits for the lowest earners should rise so that all seniors are, for the first time, protected from poverty.
Legislation by Sen. Bernie Sanders (I-Vermont) would keep Social Security solvent for 75 years. Adjusting the payroll wage cap is fair and enjoys robust public support.
That’s a bait-and-switch. The Sanders legislation goes beyond raising the tax cap to cover a higher percentage of wages, and beyond anything polled in the link Richtman provides. It also hikes taxes on investments. Taxes on investment have never before been part of Social Security’s financing (and bear no relation to its supposedly precious earned-benefit structure). The poll also ignores the biggest downsides of the massive tax increase Richtman wants. (A search for “econ” in the study—as in “economic growth” or “the economy”—comes up empty.)
Left-wingers present raising taxes on the rich as a simple solution to Social Security’s problems. They downplay how much they want to raise taxes, pretend their proposals have no costs, and altogether ignore the larger fiscal picture: for example, whether it makes sense to devote the proceeds of such a huge tax increase to keeping (or expanding) all of this program’s benefits instead of to such other purposes as saving Medicare. That’s the point of my column. It’s a point Richtman’s letter confirms.