View Single Post
Old 05-16-2019, 10:24 AM
Wrenching Spanners is offline
Join Date: Jun 2011
Location: London
Posts: 521
Originally Posted by l0k1 View Post
But the Trust Fund isn't being drawn down. Go to the website and you will see surplus after surplus since 1983 or so. The Trust Fund keeps getting bigger.

The threat to benefits is Congress deciding that we are not entitled to them. It is a political threat, not an accounting threat.
From the 2018 Trust Fund Report:

Social Security’s total cost is projected to exceed its total income in 2018 for the first time since 1982, and remain higher throughout the projection period. Social Security’s cost has exceeded its non-interest income since 2010. For 2018, cost for the program is projected to exceed total income by $2 billion and non-interest income by$85 billion.
The OASI Trust Fund reserves are projected to become depleted in
2034, at which time OASI income would be sufficient to pay 77 percent of
OASI scheduled benefits. (PDF), pages 2 & 5

Congress needs to bump up the insurance premiums, or find alternative funding. Probably the best way to do that is to raise the cap. However, raising the cap while moving up the lower threshold seems both unbalanced and foolhardy.

I’m actually having real trouble understanding the proposal in the OP. The way I’m reading it, someone with an annual wage of $20,000 is paying $1500 in social security tax, matched by their employer. This would be reduced to $500 each. The proposal seems poorly thought out, but I’m guessing your proposing an initial SS tax bracket of 2.5%. And everyone who pays in gets an automatic $2000 credit?

First off, why are you giving a break to employers? I can understand an alternative employer tax rate for the self-employed, but why are you giving a break to Walmart?

From the above document, “174 million people had earnings covered by Social Security and paid payroll taxes on those earnings.” An estimate for 2019 is 177 million taxpayers with 12 million earning above the 2018 maximum taxable earnings of $128,400. So 6.8% of earners will already be affected by an increased cap.
Unless an alternative tax, such as the carbon tax discussed in the OP is used, redistributing the social security tax burden puts a $354 billion tax burden on that 6.8% and their employers. Just looking at the individuals, that’s an average hit of $14,750 each. I’m not sure where the medians would fall as far as addition tax burden versus salary, but I’m guessing that’s going to be something like a 10% tax rise. And that’s before the shortfall in the future social security funding is addressed.

I can understand the desire to make social security tax more progressive, but the proposal in the OP comes across as a poorly thought out soak-the-rich scheme. And unless it was introduced gradually, the uncertain economic effects of shifting the tax burden foster a significant economic risk. Maybe there’s a germ of a good idea there, but the overall proposal is unconvincing.

Last edited by Wrenching Spanners; 05-16-2019 at 10:26 AM.