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Mark Warner: Lifting Payroll Cap "has to be part of any SS reform"

by: lowkell

Tue Nov 27, 2012 at 13:05:19 PM EST

Does Sen. Mark Warner read Ezra Klein, who recently noted that "Social Security taxes don't apply to income over $110,000?" Maybe, maybe not. But Warner does seem to be coming around to Klein's position on the issue, based on an answer Warner just provided to my question on his #askwarner Twitter townhall.

My question: "Before even considering cuts to Soc. Security or Medicare, will you support raising the $110,000 income cap subject to taxation?"

Warner's answer: "@lowkell I think raising the cap has to be part of any SS reform."

I checked around, including OnTheIssues, and it appears that Tim Kaine supports lifting the payroll tax cap, but that Mark Warner had, at least until now, had "No stance on record" on this issue. In contrast, Warner has said he supports raising the retirement age for Social Security, which is what Ezra Klein talks about in his column, noting the Congressional Budget Office finding that making "all income subject to payroll taxes...would do three times as much to solve Social Security's shortfall as raising the retirement age to 70." Let's hope Sen. Warner reaches the same conclusion as Ezra Klein, and the CBO, have.

lowkell :: Mark Warner: Lifting Payroll Cap "has to be part of any SS reform"
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Yes. If you raise the cap on all income, then (0.00 / 0)
You do not need to lift the age.  As Elaine points out in a comment to my diary on the FP, few people realize that one who is 52 and younger must already wait till they are 67 for full benefits.  

There's nothing in the middle of the road except yellow stripes and dead armadillos (Jim Hightower). PS I'm on Twitter here.

How about lifting the cap and then (0.00 / 0)
considering lifting the retirement age for white-collar workers like Lloyd Blankfein and others of his income bracket? :)

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[ Parent ]
Reminder: Social Security is already solvent through 2038 (0.00 / 0)
If you raise (or eliminate) the cap on taxable income, what other "reform" do you need?

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However, it is the Republican mantra (0.00 / 0)
that Social Security "must" be part of any Grand Bargain--- along with Medicare and Medicaid. They have hungered after Social Security since it was instituted, and they think they finally have an opportunity to start slicing away at it. They simply hate the safety net; yet the safety net of social security and unemployment compensation is part of what cushioned the downturn in every recession from 1940 on, enabling the economy to turn around because the population continued to consume (albeit at a reduced level), so that demand did not evaporate, as it does under an austerity program.  

[ Parent ]
Agreed, there's absolutely ZERO reason to be talking (4.00 / 1)
about raising the Social Security retirement age. None. Just remove the $110,000 cap, and Social Security will be solvent forever, pretty much.  

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[ Parent ]
If you raise the Payroll Cap (0.00 / 0)
...will you also raise the maximum amounts for benefits?  Right now, benefits are tied to contributions.  Since the contributions are capped, the benefits are capped.  In other words, Warren Buffet doesn't get more SS benefits than someone who has made $110,000 a year for most of his or her adult life.

This structure is an important reason why SS is not considered to be "welfare" or "means tested," but instead is more of an "entitlement" or an "earned benefit."

How do you think this should be handled?

With the truth (4.00 / 1)
The rich are making more than they ever have and paying lower tax rates than they ever have. If Warren Buffett has to pay a little more so my mom can make rent, that's fine with me.

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[ Parent ]
Bingo. (0.00 / 0)

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[ Parent ]
So you want to decouple Social Security contributions... (0.00 / 0)
...from SS benefits?  That's a defensible position, but its a pretty radical change in the way SS has been viewed since its inception.  For many years liberals fought very hard against "means testing" because of a fear that this would cause SS to be viewed as "Welfare," causing it to be more vulnerable to losing support.

[ Parent ]
I have no problem with it. (0.00 / 0)
The fact is, the "coupling" is a fiction anyway, as budgetary money is fungible. There is no "lock box" in reality. Plus, in general, it's absurd that someone can make $30.1 million a year, yet only the first $0.1 million a year is subject to Social Security withholding tax, while the remaining $30 million is not at all.  Finally, I'm not sure I understand why someone making $30 million a year needs Social Security at all. Isn't the key word in there "Security?"

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[ Parent ]
I agree that money is fungible (0.00 / 0)
That is why even though SS is essentially "solvent" for decades when considered in isolation, it needs to be looked at carefully in the context of our overall fiscal position.  For decades now (at least since the early 1980's) there has been a large Social Security "surplus" which has been used to finance other government operations by being lent from the SS Trust Fund to the Federal government.  As the baby boomers retire, the Trust Fund has fewer and fewer dollars to lend to the rest of the government, which must then turn to outside investors (both foreign and domestic) to buy government bonds to fund the government.

But the person earning $30 million a year gets the same benefits as someone making $100K (or whatever the cap is) per year.  If you make the super high earner pay employment taxes on all of his or her income (which is a pretty robust 12-13%, including the employer's portion which paid for by self-employed people), you are imposing a hefty tax increase on a lot of people.

Personally, because the money is fungible, I would simply get rid of the separate payroll (SS) tax and increase the marginal income tax rates (including capital gains taxes).  This would capture more income, and would end the fiction of the "Trust Fund" so that we can better understand what Social Security costs, and make more informed decisions about means-testing SS benefits.  Benefits can still be tied to earnings.

[ Parent ]
"you are imposing a hefty tax increase on a lot of people" (0.00 / 0)
No, just on the richest of the rich, who have made out like bandits the past few decades while the rest of the country has struggled...

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[ Parent ]
Doing away with the cap is a great idea (0.00 / 0)
However, I would impose a much lower SS rate above $110,000.  Eliminate the employer contribution at that level, and drop the employee rate to a 1/3rd or of what it is before $110,000.  Then do a marginal additional monthly payout on this 1/3rd rate up to $250,000 or so.  Make it a half million if you want, but the point is, everyone pays a percent or so above $110,000, and you get a bit more payout up to $250,000.  

They key to making Social Security solvent is to ensure that upwards of 90% of income is taxable.  The rate doesn't have to be high at all.

I would impose the same 1% rate or whatever on capital gains as well.  

[ Parent ]

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