I just picked this up from the AP:
"Obama: Social Security fix would be simple."
[...]
The system is funded with a tax on earnings, up to $109,000 a year. Obama says lifting that cap to tax a larger share of income would be one way to extend the system of monthly payments for retirees. It also would be unpopular with some.
How can we make lifting the cap result in overall decrease of the percentage of payroll taxes paid by most individuals and business? I have an idea...
The questions to ask are: 1) How much money does Social Security need to be solvent over time? and 2) What percentage of total income is needed to reach that amount?
The cap is at $109,000 to service what we need now, but eventually, it won't be enough (when is a matter of dispute, but not what I want to get into here). How high should the cap be? Should there be a cap at all?
It seems to me that if there was no cap at all, but we're paying the same percentage of income (both individuals and employers) there would be so much money going to Social Security the fund would have huge surpluses, allowing the percentage rate of what we pay into the fund to be significantly reduced.
Perhaps taxing gazillionaires at the same rate as real people (whatever that rate might be) couldn't get through Congress (a very likely scenario), because there is a cap on benefits, which is another factor for consideration. But, considering no other change, by only increasing the cap to some certain amount, at what point could we, say, still reduce the percentage of income for average Americans by 1 point? 2 points?
If any change to this entitlement is considered, wouldn't lowering most people's payroll taxes while increasing the cap make sense? Wouldn't the people love it and be happy and even fight for it? I know I would!
What do you think? Has anyone ever run the numbers?