Removing the Social Security Tax Cap Would Benefit Most Workers

Yves here. As we and others have discussed at some length, the concern over Social Security funding is vastly overhyped. As Nicole Woo discusses in this Real News Network interview, one simple fix, that of eliminating the cap on who is subject to the tax, would solve most of the gap that is anticipated in long-term projections. And the Social Security tax as now constituted is regressive and thus promotes inequality, so lifting the cap also moves the tax system toward being more progressive. That’s before we get to the MMT issue that “taxing” to fund any government activity is a political mechanism that is a holdover from the gold standard days, and not how government functions are funded operationally.

In fact, with more and more promised pensions being slashed, and investment returns flagging thanks to QE and ZIRP, the notion that ordinary people can save enough for their retirement is a chimera. Thus preserving and strengthening Social Security is more important than ever.

JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore.

It’s a new year, and if you’re one of those early birds, you’ve started on your taxes. But did you know that if you earn more than $118,500 year, the government can’t tax those earnings under the Social Security tax, which is also known as the payroll tax cap? That means that someone who makes twice the cap this year pays the tax on only half of his or her wages. It’s a big issue, considering the future of Social Security is continuously being debated in Washington.

Our guest today is Nicole Woo. She is the director of domestic policy at the Center for Economic and Policy Research in Washington, D.C. Her new paper is titled Who Would Pay More If the Social Security Payroll Tax Cap Were Raised or Scrapped?

Read more: http://www.nakedcapitalism.com/2015/01/removing-social-security-tax-cap-benefit-workers.html