May 01, 2005
Raise the Cap (Again)
The New York Times on raising the cap on earnings subject to social security taxes:
But one of the most widely discussed alternatives is still on the table: imposing Social Security taxes on earnings above $90,000 a year.Bush has opened the door to this debate. Progressives don't have to be suckered into a bill that could be mauled in conference, but they should be pounding on this as the real alternative to Bush's benefit cut plan. Instead of cutting benefits for the middle class, raise taxes on the wealthy who pay a LOWER TAX RATE for social security taxes than those middle class folks.
That one change would affect 6 percent of all workers, the very highest earners, but actuarial experts estimate that it would raise almost enough money to eliminate the projected shortfall without needing to cut benefits at all.
The two competing approaches - concentrating future benefits on the poor, versus raising taxes on the wealthy - are almost mirror opposites.
Under "progressive indexation," an idea developed by Robert C. Pozen, an investment executive in Boston, the role of Social Security would gradually shrink over the next century. Adding private accounts to the smaller guaranteed payments for retirees, supporters say, would soften the blow from scaling back the system to keep it fiscally sound.
By contrast, raising the ceiling on payroll taxes would maintain the system's solvency just as well, if not better, while allowing it to pay out substantial retirement benefits to the 30 million more people expected to be added to the rolls from the ranks of the nation's aging baby boomers.
Posted by Nathan at May 1, 2005 10:44 AM