Raising the Social Security Tax Cap Called into Question
A post on economics21.org by Manhattan Institute senior fellow Allison Schrager takes aim at the popular theory that eliminating the Social Security tax cap on earnings (presently $137,700) will correct the program’s solvency issue. Her article develops the point that merely eliminating the cap without changing the benefit calculation formula would not produce the level of additional income needed to achieve a long-term resolution, since benefits for higher earners would also increase. She points out further that “(e)liminating the cap without increasing benefits for higher earners would postpone the exhaustion of the trust fund until 2078” but would re-orient Social Security to be less of a “nationalized retirement savings program” than originally intended. Read Ms. Schrager’s article here…
It’s also important to note that whether benefit formulas are adjusted for high earners or not, the most a tax cap elimination would buy on the solvency timeline would be about 43 years. So, additional program adjustments are in order to achieve the multi-generational solution most sources desire. The Association of Mature American Citizens (AMAC) recognizes this, and has recommended multiple adjustments that would achieve the best path to long-term trust fund solvency without raising taxes. The AMAC recommendation is embodied in its Social Security Guarantee, a legislative framework now being discussed with lawmakers.
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