The Warren-Moreno Social Security proposal
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Elizabeth Warren and Bernie Moreno have a NYT op-ed (gift link) advocating that Social Security have its solvency extended beyond 2032 (if nothing is done before then the current government projection is that benefits would have to be cut across the board by 24%) by simply eliminating the cap on the tax, which is currently at $184.5K. The way Social Security works is that 6.2% of W-2 income is subject to the tax up to that threshold, along with a matching employer contribution, for an effective tax of 12.4%. This is pretty much a straight pass-through, in the sense that the employer contribution is salary/wages that the worker never sees.
The Social Security tax is therefore extremely regressive at the taxing end, although a lot of people aren’t aware that it’s quite progressive at the benefits end. Low-wage workers get much larger benefits relative to their contributions than high wage workers, as benefits decline relative to contributions up to the cap. Warren and Moreno are hiding the ball a bit here, because they don’t note that their fix implicitly includes no increase in benefits for people who would be taxed beyond the current cap, making the Social Security tax above that cap simply another income tax, rather than the kind of quasi-pension that it is now. (The quasi-pension structure was critical to getting the program going, since it’s well known that Confederate Jesus can’t abide “socialism,” especially for Those People).
I really don’t care about that — tax rates are way too low in this country and have to go up one way or another — but another objection is more powerful as a matter of economic justice, which is that the plutocracy on the whole gets almost none of its income in the form of wages, so its members would avoid this quite large tax increase pretty much entirely, which is no doubt why a right wing grifting scumbag like Moreno is so enthusiastic about it. As for Warren making nice with said right wing grifting scumbag for the greater good, that’s a separate if also important topic.
In any event as proposals for fixing Social Security goes this is still one of the better ones.