We may be on the brink of a bipartisan solution that’s fair
The trustees
of Social Security — of which yours truly was once a member — say the program
will be able to pay full benefits only until 2033. After
that, Social Security will be able to dole out only roughly 77
percent of benefits due.
This summer, Ohio’s Republican Sen. Bernie Moreno joined
Sen. Elizabeth Warren in proposing to raise the payroll tax cap so people with
higher incomes pay more into the program.
Fairly suddenly, the idea is emerging as an acceptable fix
among other GOP lawmakers, including Rep. Tom Cole (Oklahoma), the
influential chair of the House Appropriations Committee.
Cole thinks the political blowback from Social Security
benefit cuts would be far worse than a comprehensive solution that includes
raising taxes.
It’s another example of Republicans deserting Trump, who
thinks the “fix” for Social Security is to repeal taxes on Social Security
benefits. Trump’s fix will not save Social Security. In fact,
quite the opposite. Without the revenue from Social Security taxes, the Social
Security trust fund will run out of money even sooner.
I’m encouraged by what looks like the start of a Republican
turnaround on this. Not only are Republicans deserting Trump, but they’re
beginning — just beginning — to become sensitive to what average voters need
and want.
Contrary to conventional wisdom, the reason Social Security
is running out of money is not because so many boomers are
retiring.
The Social Security trustees anticipated the boom in boomer
retirements. This is why Social Security was amended back in 1983, to
gradually increase the age for collecting full retirement benefits from 65
to 67. That change is helping finance the boomers’ retirement.
The real reason Social Security is running out of money
is something the trustees never anticipated: how much of the nation’s total
income is going to the top.
A big part of the American working population today is earning less than the Social Security trustees anticipated years ago — reducing revenue flowing into the program.
Had the pay of American workers kept up with the trend
decades ago — as well as their growing productivity —
their Social Security payments would have kept the program flush.
But a much larger
chunk of the nation’s
total income is now going to the top compared to decades ago.
Yet income subject to the Social Security payroll tax is
capped. No dollar of earnings above the cap is taxed. The
cap in 2026 is $184,500.
So, as the rich have become far richer, more
and more of the nation’s total income has
escaped the Social Security payroll tax.
A CEO earning $20 million a year pays Social Security taxes
on roughly 1
percent of their income, while a worker earning under the
cap pays Social Security taxes on 100
percent of their income.
They both end up paying the same amount of money into the
program. This isn’t fair.
The rise in the amount of income above the cap due to
inequality has cost the Social Security Trust Fund reserve more than $1.4
trillion since 1983.
The solution is obvious: scrap the cap and make the rich pay
more in Social Security taxes.
One
plan introduced by Democrats in Congress would eliminate the cap on
earnings over $250,000 and also subject investment
income to Social Security taxes.
It’s estimated that this would extend the solvency of Social
Security for
the next 75 years without raising taxes on 93 percent of American
households.
Bottom line: Trump’s plan will destroy Social Security.
The Democrats’ plan will save it — and do
so fairly. Remarkably, Republicans are coming around to this plan.
If we want to ensure Social Security’s long-term future, and
that working people can retire with dignity, we must make the wealthy pay their
fair share.
