Social Security’s Taxable Maximum Drawing Congressional Attention - MSN.com; AMAC Foundation
As the clock ticks toward a late-2032 financial catastrophe for America’s seniors, the rhetoric over what to do about the problem is also heating up. Evidence of this heightened interest surfaced earlier this week, with Senators Elizabeth Warren (D – Mass.) and Bernie Moreno (R – Ohio) joining forces in a New York Times Op Ed to advance the notion of eliminating the Social Security taxable maximum (officially known as the program’s contribution and benefit base) in a move to extend the program’s financial life a bit further. An MSN.com staff report describes the Senators’ motivation in their opinion piece.
Eliminating the taxable maximum has been a frequent target of those proposing Social Security reform, often framed as a “fix” for the program’s long-term funding shortfall. Many “experts ” agree, however, that removing the cap completely would be a partial solution and that additional measures are needed to achieve long-term resolution. Some have suggested a more gradual change to the limit by accelerating the annual adjustment, possibly by increasing the annual adjustment factor (currently based on the national average wage index) so that the cap grows faster than it has historically.
The fundamental argument rests on the assumption that the limitation makes the payroll tax overly regressive and thus at odds with Social Security’s progressive intent. Further argument relates to the income disparity that has developed since the 1983 Social Security regulatory overhaul. While both of these tenets are real, reaching a consensus on what to do with the taxable maximum requires considering the full picture, including its history and its relationship to how benefits are calculated. In a sense, eliminating the taxable maximum is not as simple as it appears on the surface, as explained in a previous post on this site. Nevertheless, it’s becoming clear that the taxable maximum issue will be one of the central arguments in whatever reform deliberations are undertaken in Washington.