Now this is a useful tax hike
by digby
I'm pleased to see a discussion finally taking place about raising the cap on social security taxes. Better late than never. This piece by Dylan Matthews spells it out:
The Begich bill would lift the current payroll tax cap, which exempts wages in excess of a certain amount ($110,100 this year) from the tax. In turn, it would give high earners, who would pay more, additional benefits upon retirement, just as benefits increase as wages do for workers below the cap.
According to the Congressional Research Service, a change like that would almost entirely wipe out the program’s long-run actuarial imbalance. Specifically, it would eliminate 95 percent of the shortfall, meaning that a mild increase in the payroll tax rate from 12.4 percent to 12.5 percent would be enough to cover the tiny remaining gap. And without any changes at all, the program would be able to pay out full benefits until after 2085. Indeed, the exhaustion date for the trust fund following such a change is so far in the future that CRS didn’t even calculate it.
But Begich’s bill doesn’t just increase taxes for high earners. It also increases benefits across-the-board. While Bowles-Simpson and Domenici-Rivlin adopt a stingier “chained CPI” measure for inflation, Begich adopts “CPI-E,” or a measure that specifically captures inflation in goods that seniors buy.
Due to deteriorated health and other considerations, goods seniors buy tend to be more expensive than those younger people purchase. Begich’s CPI-E change would mean, effectively, a 4.5 percent benefit increase for the program’s beneficiaries, including not just seniors but their designated survivors and disabled Americans as well.
Matthews goes on to say how this could be a new progressive rallying cry which is great. (It's long been the preferred solution of progressive movement types but we're a bunch of losers, so nobody ever paid any attention to it.) Anyway, this would be great if it could make it into the argument.
As Merrill Goozner has pointed out, the reason this is the right answer is not because liberals just love to tax the hell out of everyone, but because of the growth in income inequality since the 1980s: "when more of total wage and salary income goes to the upper 10%, a greater share falls above the cap and escapes SS taxation." When TipnRonnie made their deal social security taxed 90% of wages and it only taxes about 83% now. Raising the cap and the benefits won't kill the wealthy since they're gobbling up more and more of the nation's wealth as it is.
Update: Oh, and by the way, raising the Medicare age because Joe Lieberman thinks that everybody's living healthy until they're 80 nowadays is just crazy talk. I love all these guys who have been blessed with good health and great medical care all their lives lecturing the rest of us about how we need to just suck it up.
Alan Grayson was right:
"Don't get sick --- and if you do get sick, die quickly."
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