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Can a Higher Wage Cap Save Social Security?
Currently the first $137,700 in earnings is subject to the 12.4% Social Security payroll tax (split evenly between employees and employers). All of the Democrat candidates suggest increasing it, and The Social Security 2100 Act working its way through the House would do that too. It seems an effective way to address the program’s ill financial health. But it isn’t necessarily. Why? If the program’s rules were to change to increase the wage cap, it would also raise the maximum benefit, thus the two would effectively negate one another.
Maurie Backman points out in this piece that substantially raising the wage cap is something higher earners would notice. Further, because the wealthy wield a lot of power and care little about getting a modest boost to their benefits in retirement, they most certainly will care about paying a lot more taxes on their income in the near term. This might cause lawmakers to be hesitant of getting on the bad side of those most likely to fund their political campaigns and offer ongoing monetary support. Read Backman’s full piece here.
The Association of Mature American Citizens (AMAC) has a plan to preserve and modernize Social Security without increasing taxes. This can be achieved by making modest changes in cost of living adjustments and the retirement age. AMAC advocates for a bipartisan compromise, “The Social Security Guarantee Act,” taking selected portions of bills introduced by former Rep. Johnson (R-TX) and current Rep. Larson (D-CT) and merging them with the Association’s own well researched ideas. One component is Social Security PLUS, a new, voluntary plan that would allow all earners to have more income available at retirement. This component is intended to appeal especially to younger workers. AMAC is resolute in its mission that Social Security be preserved and modernized and has gotten the attention of lawmakers in DC, meeting with a great many congressional offices and their staffs over the past several years. Read AMAC’s plan here.