“Fixing” Social Security–Understanding the “Raise the Cap” Approach
You’ve heard it before, and you’ll hear it again: “Just eliminate the Social Security payroll tax cap and the solvency problem goes away.” In fact, you’re hearing it right now via deliberations on HR-860, “The Social Security 2100 Act” now under review in the House Ways and Means Committee. While that’s a popular rallying cry among those tuned into Social Security’s long-term funding crisis, it’s important to understand why this strategy of “taxing the rich” is not as even-handed as it appears, according to the Motley Fool’s Sean Williams.
In a post on www.fool.com, Williams explains why the payroll cap exists in the first place, citing the fact that while the tax on income is capped, so is the maximum benefit attainable under the current program rules. “The payroll tax cap exists because a maximum retired worker benefit amount also exists,” Williams notes. His analysis also discusses the imbalance on overall return on investment in Social Security, explaining that workers taxed at the current maximum levels would likely receive less than what they contributed, while lower earners would receive a higher overall return.
While Williams’ analyses are based on mathematical facts and assumptions, they are (as he points out) unpopular and in the court of public opinion do not reflect a level playing field for taxpaying workers. Click here to read his posted article, titled “Social Security: The Rich Are Already Paying Their Fair Share.”
As many are aware, the Association of Mature American Citizens (AMAC) has been actively engaged in the battle to craft legislation for a long-term solution to Social Security’s solvency issue. Dating back several years, AMAC has been advocating a legislative framework that would guarantee solvency for generations to come, with relatively minor adjustments and additional program provisions to assist future retirees in preparing for the financial realities of retirement. Most recently, AMAC has put forth an updated version of this framework, “The Social Security Guarantee Act,” a plan that combines the Association’s original platform with selected assumptions taken from legislation introduced by former Representative Sam Johnson (R) of Texas and Representative John Larson (D) of Connecticut to achieve what is the best path to long-term Trust Fund solvency without raising taxes. Learn more about the “The Social Security Guarantee Act” by visiting AMAC’s website.
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