Dems Brandish New Counterproposal In Social Security Fight: Tax The Rich

UNITED STATES - OCTOBER 9: Senate Veterans' Affairs Chairman Bernie Sanders, I-Vt., flanked by Sens. Sherrod Brown, D-Ohio, Jon Tester, and Mark Begich, speaks as the Senate Veterans' Affairs Committee Democrats hold... UNITED STATES - OCTOBER 9: Senate Veterans' Affairs Chairman Bernie Sanders, I-Vt., flanked by Sens. Sherrod Brown, D-Ohio, Jon Tester, and Mark Begich, speaks as the Senate Veterans' Affairs Committee Democrats hold a news conference to highlight the impacts of the government shutdown on veterans on Wednesday, Oct. 9, 2013. (Photo By Bill Clark/CQ Roll Call) (CQ Roll Call via AP Images) MORE LESS
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The definitive Democratic counterproposal in the fledgling fight over Social Security is starting to emerge, and it has a familiar ring in the era of income inequality politics: tax the rich.

More specifically, Democrats are proposing to raise or eliminate the cap on Social Security taxes. Those taxes are currently collected up to $118,500 of a person’s income, and any income above that is Social Security tax-free. The liberal Center for American Progress said in a new report last week that the program had lost $1.1 trillion over the last 30 years because of it.

Sen. Bernie Sanders (I-VT) announced last week that he would propose eliminating the cap for income above $250,000. His office estimated that that would keep Social Security solvent until 2060; the program is currently projected to start running out of money in 2033.

“If Republicans are serious about extending the solvency of Social Security beyond 2033,” Sanders said, “I hope they will join me in scrapping the cap that allows multi-millionaires to pay a much smaller percentage of their income into Social Security than the middle class.”

Lifting or doing away with the cap is one of those reforms that has been proposed for some time in academic and think tank circles, but it is now becoming the default Democratic response to any Republican proposals that might lead to benefit cuts. Then-Sen. Tom Harkin (D-IA) introduced legislation last Congress that would have gradually eliminated the tax cap.

One of the co-sponsors of that bill was Sen. Sherrod Brown (D-OH), now ranking member of Senate Finance’s Social Security subcommittee. Brown spoke in favor of the CAP report last week and told TPM that he would soon introduce legislation of his own. The CAP report said that because of growing income inequality, the percentage of the collective national income taxed for Social Security had fallen from 90 percent to 83 percent. Raising the cap in 2015 to again tax 90 percent of the nation’s applicable income would close Social Security’s $11.1 trillion shortfall over the next 75 years by more than one-fourth, according to CAP.

It’s an idea that appeals to liberals and even centrist deficit hawks, at least to a point. But not to conservatives. House Budget Chair Tom Price (R-GA), who has said he’ll include Social Security reforms in his forthcoming FY 2016 budget, did not include it among the reforms he floated last month.

“We do not support increasing taxes on the American people,” a Republican aide told TPM when asked about Sanders’s proposal.

The cap does exist for a good reason, policy experts told TPM. Social Security benefits are paid in part based on how much people pay into the system. Without a cap, it’s possible that multi-millionaires and billionaires would accrue huge Social Security benefits by the time they retire. The cap also arguably helps politically by keeping Social Security as a social insurance program instead of welfare where the rich pay in to help the poor.

Sanders’ announcement didn’t specify how he would address the effect that raising the cap would have in increasing benefits for the wealthy, but his office said a bill is forthcoming. There have been proposals to counter that effect, such as increasing the cap only for employer contributions while keeping it for employees. Sanders’ proposal appears to be designed to address another issue: Not raising taxes on the middle class (as defined by $250,000 a year for a family). So income from $118,500 to $250,000 would still be tax-free, allowing Democrats and President Barack Obama to keep a campaign promise.

But the particulars probably don’t matter much. Any bills proposed by Sanders or Brown aren’t going anywhere in a Republican-controlled Congress.

“This is where I’d say ‘The odds of Republicans being willing to raise taxes, including raising the taxable maximum amount subject to Social Security payroll taxes, are slim and none… and Slim just left town!'” Jason Fichtner, who studies Social Security issues at the conservative Mercatus Center at George Mason University, told TPM in an email.

But Democrats believe it will give them some leverage in the political debate. Past polling has found strong public support for raising the tax cap. As Brown told TPM last week, Democrats might not be able to advance legislation on their own, but they are still trying to win the political debate.

“The history says that the more the public finds out about the Republican position on Social Security, the more we win,” he said. “Our hope is always, sure, win the political debate for the next election. That of course is a byproduct, but what really matters is to win the debate so that the public begins to understand the contrast between the two and push the Republicans to do the right thing here.”

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