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There are simple fixes that could dramatically extend the reserve depletion date to sometime in the 2050s. Not doing so is purely a political question. Increas

There are simple fixes that could dramatically extend the reserve depletion date to sometime in the 2050s. Not doing so is purely a political question. Increasing the marginal rate of income tax for anyone making more than $120,000 by 12%+ may be a "simple" fix or just a matter of politics, but it's some pretty hard politics! (And also might lead to some unfortunate economic outcomes.)

mikeyouse 10y ago
> Increasing the marginal rate of income tax for anyone making more than $120,000 by 12%+ may be a "simple" fix or just a matter of politics, but it's some pretty hard politics! (And also might lead to some unfortunate economic outcomes.) Two things come to mind; The politics shouldn't be that hard in the current populist environment since only ~6% of taxpayers earn above the max.[1] Secondly, employees would 'only' see a 6% marginal tax increase since the employer portion isn't included with AGI. But there are numerous other options to extend the program as well. The top 5% of taxpaying households earned at least ~$170k in 2011. As a simplifying assumption, let's just say they all meet the cap. There were 6.8 million returns above this level, which would mean that only $800 billion of the $2.8 trillion in AGI earned that year was subject to the social security tax. If you levy a 1% tax on income above the FICA limit, it would raise an additional $40B/year which with simple perpetuity math would mean an additional $1.2 trillion into the trust fund.[2] Alternatively, since the top 5% of income payers receive something like 1/3 of their income from capital gains (which aren't subject to any FICA taxes), a 1% levy on capital gains would likely raise a similarly large amount. I don't have any specific preference for those two ideas, but they're just a few examples. [1] - https://www.ssa.gov/policy/docs/policybriefs/pb2011-02.html https://www.ssa.gov/policy/docs/policybriefs/pb2011-02.html [2] - Base figures from here: http://www.mybudget360.com/wp-content/uploads/2015/06/irs-tax-data1.png http://www.mybudget360.com/wp-content/uploads/2015/06/irs-ta...
- twoodfin 10y ago
  Appreciate the thorough response. Sorry to have been somewhat glib: I've just run into a few too many folks who argue that SS solutions are as easy as "lifting the cap". I think voters (especially the high income voters who would be affected) aren't likely to be fooled by the employer/employee split, even putting aside those who are self-employed. And raising taxes on a whole bunch of "moderately" high earners in deep blue, high cost-of-living cities isn't particularly popular even with Democrats: They worked hard in the last go-round to push President Obama to only end the Bush rate cuts for the "truly" wealthy households at $400K+. I also think you're slightly over-estimating the money available over the cap: There are presumably many more households with two earners closer to $85,000 each than households with one earner at $170k, and SS taxes are collected per-earner. A little calculation from here... https://www.ssa.gov/policy/docs/chartbooks/fast_facts/2016/fast_facts16.html https://www.ssa.gov/policy/docs/chartbooks/fast_facts/2016/f... ...suggests that the total taxed income base of Social Security is around $6.4T. Total AGI is somewhere around $9T, so 1% of the difference is $26B (and of course that AGI includes capital gains, so that's all you can get in total with both tweaks). Maybe another $10B or so since the taxes could come off gross income rather than adjusted gross. Anyway, it's certainly not impossible to make the numbers work, especially if the economy doesn't go into a Trump-induced tailspin.

mikeyouse 10y ago

> Increasing the marginal rate of income tax for anyone making more than $120,000 by 12%+ may be a "simple" fix or just a matter of politics, but it's some pretty hard politics! (And also might lead to some unfortunate economic outcomes.) Two things come to mind; The politics shouldn't be that hard in the current populist environment since only ~6% of taxpayers earn above the max.[1] Secondly, employees would 'only' see a 6% marginal tax increase since the employer portion isn't included with AGI. But there are numerous other options to extend the program as well. The top 5% of taxpaying households earned at least ~$170k in 2011. As a simplifying assumption, let's just say they all meet the cap. There were 6.8 million returns above this level, which would mean that only $800 billion of the $2.8 trillion in AGI earned that year was subject to the social security tax. If you levy a 1% tax on income above the FICA limit, it would raise an additional $40B/year which with simple perpetuity math would mean an additional $1.2 trillion into the trust fund.[2] Alternatively, since the top 5% of income payers receive something like 1/3 of their income from capital gains (which aren't subject to any FICA taxes), a 1% levy on capital gains would likely raise a similarly large amount. I don't have any specific preference for those two ideas, but they're just a few examples. [1] - https://www.ssa.gov/policy/docs/policybriefs/pb2011-02.html https://www.ssa.gov/policy/docs/policybriefs/pb2011-02.html [2] - Base figures from here: http://www.mybudget360.com/wp-content/uploads/2015/06/irs-tax-data1.png http://www.mybudget360.com/wp-content/uploads/2015/06/irs-ta...

twoodfin 10y ago
Appreciate the thorough response. Sorry to have been somewhat glib: I've just run into a few too many folks who argue that SS solutions are as easy as "lifting the cap". I think voters (especially the high income voters who would be affected) aren't likely to be fooled by the employer/employee split, even putting aside those who are self-employed. And raising taxes on a whole bunch of "moderately" high earners in deep blue, high cost-of-living cities isn't particularly popular even with Democrats: They worked hard in the last go-round to push President Obama to only end the Bush rate cuts for the "truly" wealthy households at $400K+. I also think you're slightly over-estimating the money available over the cap: There are presumably many more households with two earners closer to $85,000 each than households with one earner at $170k, and SS taxes are collected per-earner. A little calculation from here... https://www.ssa.gov/policy/docs/chartbooks/fast_facts/2016/fast_facts16.html https://www.ssa.gov/policy/docs/chartbooks/fast_facts/2016/f... ...suggests that the total taxed income base of Social Security is around $6.4T. Total AGI is somewhere around $9T, so 1% of the difference is $26B (and of course that AGI includes capital gains, so that's all you can get in total with both tweaks). Maybe another $10B or so since the taxes could come off gross income rather than adjusted gross. Anyway, it's certainly not impossible to make the numbers work, especially if the economy doesn't go into a Trump-induced tailspin.