As Social Security fund runs dry, some Republicans say it’s time to raise taxes
... But Cole, at least, said he thinks the political blowback from Social Security benefit cuts would be far worse than a comprehensive solution that includes raising taxes.
“I love Grover [Norquist]. But … you’ve got to deal with Social Security,” Cole said. “And believe me, you’ll have a lot bigger problem if it goes bankrupt than you’ll have keeping it whole, because people will feel cheated.” ...
Tom Cole is right. Just fix the damn thing.
A person who has contributed the maximum every year since 1983 has accumulated about $475,000 including the employer match. At a current maximum monthly benefit draw of about $5.1k, that sum is exhausted in just under eight years, if he lives that long.
The wage cap for Social Security taxes paid by such a person has not been pegged to inflation. It's been higher than that. Had it been pegged only to inflation since 1983, Social Security taxes today would top out at $120k of wages instead of $184,500.
The wage cap tracks the national average wage index. And Medicare taxes are not capped at all and capture all income.
If it's true that the intent of indexing to the national average wage index was to capture 90% of all aggregated U.S. earnings, a future fix should include an increase to the wage cap to close the gap which has developed. Today's cap captures only 83% of aggregated income.
In other words, the wage cap, even though it rose much higher than the rate of inflation since 1983, still did not rise high enough.
We should fix that and move the wage cap higher as indicated, but we should not remove the wage cap entirely, which would sever the connection between contributions and benefits. That means raising the wage cap to $300,000 and creating a mechanism for automatic increases to maintain the 90% standard.
That would be in addition to raising the retirement age gradually from 67 to 69, and immediately raising the payroll tax to 7.2% from 6.2%.
Just do it.
