Lift the Cap

This Paul Starr piece on Social Security, contra Zeitlin, is just so damn wrong:

Eliminating the cap on taxable earnings in Social Security will change the relationship to the program of people in the income brackets over $97,500, most of whom are not to be confused with plutocrats. Social Security remains a good deal for most of them because it provides income in old age that, unlike private pensions, is indexed for inflation. Even for affluent seniors, this is a form of inflation-risk protection that serves a valuable role in a portfolio of retirement income.
But take off the cap on taxable earnings, and many upper-middle-income people will decide the program is no longer in their interest. If you want to revive the movement toward privatization, eliminating the cap on taxable earnings would be just about the best thing you could do.

If Democrats care about reshaping the tax code to help the middle class, then evening the burden of payroll taxes should be our first resort. My preferred option would be to lift the cap and institute a flat per-dependant deduction, so that it’s slightly progressive, but even a flat tax would be better than the rampant regressivity we have now.
Yes, this would “change the relationship to the program of people in the income brackets over $97,500”. Would Social Security stop being a social insurance plan? Of course. Would it start being a welfare program? Sure. Is there anything wrong with that? Of course not. It’d be a massively broad-based, effective welfare program, and if Democrats had the strength of their convictions they would stand up for welfare qua welfare, instead of this social insurance crap. Might lifting the cap hurt political support for social security? Slightly, yes, but it’s still such an ingrained part of American life that it’d downright silly to think that such a move would lead to its demise. Moreover, our primary concern in crafting entitlements shouldn’t be political viability, it should be fairness and progressivity, and not lifting the cap serves neither of those ends.

4 thoughts on “Lift the Cap

  1. I don’t really want to get into the social insurance vs welfare program debate now, but it’s worth pointing out that your position isn’t just contra me, but also contra GFR and Ezra Klein, who also favorably linked to the Starr piece. I know this is just a lame appeal to authority, but still.

  2. I don’t really want to get into the social insurance vs welfare program debate now
    To be perfectly honest, I don’t either. I’ve got le homework.
    [Y]our position isn’t just contra me, but also contra GFR and Ezra Klein, who also favorably linked to the Starr piece. I know this is just a lame appeal to authority, but still.
    Yeah, and obviously GFR and Ezra are both awesome and right 90% of the time. For that matter, I like Starr on most issues. But I just think they get this one wrong by overestimating (and overemphasizing) the negative political impact lifting the cap would have.

  3. I am with Dylan on this. It is a rather defeatist reverse politics argument, or maybe a suspect one. We have to keep taxes regressive, the argument goes, for otherwise the rich would torpedo the government.
    Certainly the tax system would be fairer if there were no cap on payroll taxes. The one good argument to the contrary is that that cap mainly helps the moderately rich. The tax code is undermined in much greater ways by the rules for capital gains and unreported business income.

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