Raise cap on Social Security
Raising the cap on earnings that are taxed to fund Social Security wouldn’t, by itself, resolve all of the federal program’s ills.
But it’s one reasonable option amid the big, politically volatile job that lies ahead for Congress, if the program’s future financial stability is to be ensured.
Yet, don’t look for anything significant to happen on the Social Security front in 2014. This is a congressional election year, and major changes such as what a real Social Security fix would entail will be too hot to handle for most lawmakers while their congressional seats are on the line.
Meanwhile, lawmakers understand from polls that they’re already in hot water, due to their poor performance on many issues outside of Social Security.
Expect this year to be one of cozying up to the voters, rather than doing anything meaningful regarding Social Security that might further anger some voters.
As reported in the Jan. 5 Mirror, one finding of an Associated Press-NORC Center for Public Affairs Research poll conducted Aug. 8 through Sept. 10 was that those 50 and older want Congress to raise the Social Security earnings cap – the earnings limit on which wages may be taxed for Social Security purposes – above the current $113,700 top figure.
That would bring more money into the program but undoubtedly not as much as 50-and-older citizens envision. Also, it’s doubtful Congress would apply the tax to all wages, even though all earnings are subject to the Medicare tax.
If all wages were made subject to the Social Security tax – the tax rate is 6.2 percent of salary – the question would become how high to adjust the maximum Social Security benefit for high-income people, or not adjust it above current eligibility.
Current law requires employers to also pay 6.2 percent of employees’ salaries on their workers’ behalf. Requiring employers to match higher-income employees’ bigger Social Security tax obligation could impose a hardship on some businesses, possibly causing some to reduce the size of their workforce.
Still, at this time there are many more above-$113,700-a-year salaries than there were, say, 20 years ago. The money that raising the cap – to maybe $200,000, $250,000 or $500,000 – would bring in is worth pursuing.
One other point:
If Congress were to raise the employee cap, while allowing employers’ contribution to remain based on the current cap or just a slightly higher figure, the negative impact on companies could be minimized or eliminated – but the benefit to Social Security would not be as great as otherwise possible.
All aspects of the Social Security issue are complex and, no matter what corrective action is taken – when Congress musters the courage to tackle this difficult task – somebody is destined to end up unhappy.
Despite their rhetoric, lawmakers understand that the party responsible for Social Security not being able to pay full benefits will likely suffer the “wrath of the voting booths.”
At the same time, reducing Social Security benefits would require more seniors to continue working, making fewer jobs available for younger people.
Getting rid of – or raising – the Social Security earnings cap is a good, important first step for Congress to pursue, if lawmakers truly are committed to saving the program for future generations. Launching that work should not wait for another year.