Social Security: Raise the Damn Thresold

I've been talking about this for years and trying to guess at its contribution, but I finally got the bright idea to see if anyone had done the work... and of course they had.  The Social Security administration in fact.  I copied the summary of the  Social Security: Raising or Eliminating the Taxable Earnings Base (21 December 2021) report below (my bolding).

Points not to miss:

1) While 6% of incomes are above the cap and not subject to the tax on that part, because the richer are grossly richer today the percent of non-taxable income has shifted from 10% in 1982 to 17% in 2020.  So 7% less revenue base for social security because of growing inequality, meaning 7% less revenue.

2) By eliminating the threshold we could probably get through the boomer retirement years without raising payroll tax rates or decreasing benefits. 

On point 2, you probably know by now I do not see social security as a retirement plan but a generational tax that I support because it keeps the economy strong and promotes the general welfare of the nation.  So let the rich pay the generational tax too since they benefitted most from the human infrastructure of the economy.

The tax burden on the wealthy has never been lower.  And the economy grew faster when the top tax rate was 70% or above.  But the wealthy have too much control over government today and so the push will be for lower social security benefits sooner than later.

Why not wait until the trust fund runs out.  First the trust fund is not real.  And since expenditures just began exceeding revenue, in terms of cash flow the rest of the tax revenue has to cover more of the budget... or debt, or monetization of the budget.  In other words, they lowered corporate taxes along time ago when they started creating the fake trust fund because of the increase in cash flow from payroll taxes.  Besides allowing lower taxes on the wealthy it meant less need for gov't borrowing... less Treasuries issued which in turn meant lower interest rates for a long time.

Summary

Social Security taxes are levied on covered earnings up to a maximum level set each year. In

2022, this maximum—formally called the contribution and benefit base, and commonly referred

to as the taxable earnings base or the taxable maximum—is $147,000. The taxable earnings base

serves as both a cap on contributions and on benefits. As a contribution base, it establishes the

maximum amount of a worker’s earnings that is subject to the payroll tax. As a benefit base, it

establishes the maximum amount of earnings used to calculate benefits.

Since 1982, the Social Security taxable earnings base has risen at the same rate as average wages

in the economy. Because the cap is indexed to the average growth in wages, the share of the

population below the cap has remained relatively stable at roughly 94%. However, due to

increasing earnings inequality, the percentage of aggregate covered earnings that is taxable has

decreased from 90% in 1982 to 83% in 2020.

Raising or eliminating the cap on wages that are subject to taxes could reduce the long-range

deficit in the Social Security trust funds. For example, the Social Security Administration’s Office

of the Chief Actuary (OCACT) estimates that phasing in an increase in the taxable maximum (for

both contributions and benefits bases) to cover 90% of covered earnings over the next decade

would eliminate nearly 20% of the long-range shortfall in Social Security. OCACT’s estimates

also show that if all earnings were subject to the payroll tax, but the current-law base was retained

for benefit calculations, the Social Security trust funds would remain solvent for about 35 years.

However, having different bases for contributions and benefits would weaken the traditional link

between the taxes workers pay into the system and the benefits they receive.

Social Security: Raising or Eliminating the Taxable Earnings Base (21 December 2021)