Feb 20, 2013

Getting Freaked Out Over Removing F.I.C.A. Cap

     There are more and more signs that the right is getting freaked out at the prospect that Social Security's long term funding problems will be solved by lifting the cap on F.I.C.A. contributions. Today's New York Times has an op ed piece by Yuval Levin promoting the idea of means testing Social Security benefits. Levin works for a right wing think tank and edits a right wing journal.
     As Levin and others who promote this idea well understand, means testing undermines Social Security in the long run. If means testing is adopted, Levin and others will immediately start describing it as "welfare" and calling for it to be abolished. 
     Yuval Levin and others may try to label lifting the F.I.C.A. cap as some weird left wing idea that could never be adopted but there is wide support for lifting the F.I.C.A. cap even among Republicans. That's why Levin and others on the right are so freaked out. They're doing everything they can to derail the freight train headed their way. I know. The freight train isn't going to arrive while Republicans control the House of Representatives but that won't last forever.
     Maybe those who oppose lifting the F.I.C.A. cap ought to just shut up about Social Security's funding problems. The more they agitate on this subject, the closer we get to removing the F.I.C.A. cap


Anonymous said...

raising the cap is shifting wealth from the wealthy to the poor.

Anonymous said...

It would increase your credibility, Charles, if all of your comments weren't so ideological

Don Levit said...

Increasing the cap, if the point breaks, remain the same, means that for every dollar of contribution above the present cap, one is promised 15 cents of benefits.
That confirms the contributions to Social Security are taxes, for what "insurer" would provide such a costly annuity and survive among its competitors?
Of course, what insurer would loan its reserves to a subsidiary to pay for other expenses?
Raising the numbers in the trust fund makes it no more able to pay its benefits.
Don Levit

Anonymous said...

Every problem is to be solved by "taxing the rich" as if the rich do not pay any taxes, let alone more taxes than anyone else. Taxes on the rich were just increased, and already O and the dems are out calling for more, to "solve" the sequestration threat. The mindless drones of the left have no other answers.

Anonymous said...

Remove the FICA tax cap. Put a hard cap on max benefits one can receive

Problem solved!

PS I'm with charles on this one. It's going to happen. sooner or later. guaranteed

Anonymous said...

Dang, are all the rich people complaining about how high taxes are/are to become all 23-year-old new business owners or something?

Taxes were much higher not even two decades ago. Income taxes, capital gains taxes, etc. etc. Go back further to the administrations of reagan, ford, carter, kennedy, dwight d., etc., and you'll find that taxes were MUCH higher a generation ago.

It blows my mind that today 30-someodd percent tax on income and a paltry tax on capital gains are stifling and unacceptable when rates were over twice those during some of our biggest economic booms.

Greedy rich.

Mike B. said...

Don Levit wrote "for every dollar of contribution above the present cap, one is promised 15 cents of benefits." I don't agree. The top 15% marginal rate converts average indexed monthly earnings (AIME) to monthly benefits. The tax rate is 6.2%. So for $1000 in extra covered earnings, you would pay $62 in taxes, your AIME would go up by $1000/(35*12)=$2.38 (35 is number of years used for AIME), entitling you to $2.38(15%)=$0.36/month. If you collect benefits for 20 years, that's $86 in benefits for $62 in taxes.

Of course, the employer also pays $62. But, on the other hand, the 6.2% is not all for old-age benefits (it includes survivors and disability benefits). So it's not a great deal with high income people, but it's a lot better than 15 cents on the dollar.