Saturday, October 18, 2014

Andy Tobin's vision of the future of social security: Do nothing and let it go broke

Well, Tobin didn't say that but his policies converge on that conclusion.  Here is a piece by Robert Robb in The Republic/azcentral.  (I usually avoid Robb's columns because of his conservative views, but this one deserves comment.)

According to Tobin, in a recent debate Kirkpatrick expressed support for increasing the wage cap on Social Security contributions and changing the inflation measure used to adjust benefits. Tobin vows never to raise the retirement age, cut Social Security benefits or increase Social Security taxes.

Robb has this right.  You cannot have this one all ways.  I think most people recognize the need to do something, but the disagreement is what the something ought to be.  And here is where Robb and I differ. He says:

Increasing the wage contribution cap is a very bad idea. The cap currently applies to both contributions and benefits. If the cap is lifted for both, there's little net saving to the system. If it is lifted only for contributions, that is the equivalent of a large income tax increase and would have a devastating effect on capital formation.

Wrong.  The 2014 cap is $117,000 (according to ssa.gov).  The income tax increase, if you want to call it that,  thus would only affect those earning above $117,000.  The median household income in 2013 was just shy of $52,000.  Only 5% of the population earn $117,000 or more.  (Data from US census.)

So Robb's assertion, that lifting the cap would be "equivalent of a large income tax increase and would have a devastating effect on capital formation" is just a different way of saying he does not want the very wealthiest among us to pay more toward keeping social security solvent.

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