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One Viewpoint on “Fixing” Social Security - WealthManagement.com; AMAC
“Keep it simple” is an oft-used directive to address complex situations. Sometimes it works; sometimes it doesn’t. WealthManagement.com’s Kathryn Anne Edwards seems to think simplicity is the appropriate path to solving Social Security’s looming financial catastrophe, as hinted in her recent post titled “How to Fix Social Security, in Six Words.” Spoiler alert: the six words are: Scrap the cap, invest the rest.
Her reasoning is that removing the taxable maximum provision currently in place (you know, the $184,500 earnings level at which payroll taxes cease) would allow the trust funds to grow. Then, use the trust funds like a sovereign wealth fund, investing part of them in financial markets. Her caveat is, “If managed well, it would raise more revenue, reducing the need for further tax increases, possibly even garnering tax cuts in the future.”
No doubt this idea will work its way into discussions on how to deal with Social Security’s problems, and in fact it already has. To be clear, though, it’s not as simple as it seems, and it sidesteps the reason why there’s a taxable maximum in the first place. For more on this issue, check out this AMAC Foundation article that provides background on the taxable maximum issue. AMAC, in its Social Security Guarantee proposal, recognizes the role that changes to the taxable maximum can play in addressing the long-term funding problem and offers a different solution…one that gradually changes the tax limit over a period of years.