Andrew Biggs, former Deputy Commissioner of Social Security, has written a piece for the American Enterprise Institute blog on lifting the cap on earnings covered by the Social Security F.I.C.A. tax. He's against it. His argument is that:
The real question is whether to impose higher taxes on high earners in order to pay higher benefits to high earners. I say no. They care a lot more about their taxes than their benefits and they’re fully capable of saving on their own. I’d be more than happy to have a Social Security program that was more redistributive—and more generous to low earners—than today’s system if we could also make it smaller and more affordable. Given the other bills coming due, that makes more sense to me.It is arguable whether high wage earners care more about taxes than benefits. In any case, there is another possibility: Raise the F.I.C.A. cap but cap Social Security benefits. That makes Social Security more redistributive. It also eliminates foreseeable Social Security funding problems. It does not make Social Security smaller but that is Andrew Biggs' goal. I see no evidence that the public shares this goal. Raising taxes on the wealthy to solve Social Security's long term funding problems is wildly popular. Take a look at the polls:
I am very gratified that Mr. Biggs is inclined to let us have a Social Security program as long as its nice, and small, and doesn't disturb his sense of the right order of things.
ReplyDeleteThe idea of raising the cap is popular, but not really necessary. I am, of course, assuming that the economy will recover and there will be some growth in employment. And, the Trust Fund will be used as intended in the 1983 program fix. Anyhow, for a lot of very good information on Social Security and how it's financed, see Bruce Webb and Dale Coberly's excellent articles on the Angry Bear Blog. The information is accurate and their conclusions are sound. Nancy Ortiz