In a new poll, raising Social Security's retirement age got a resounding thumbs-down as a potential solution to shoring up the system's long-term funding shortfall. According to a recent USA Today/Gallup poll Americans were quite clear that their preferred solution is to have the wealthy do the majority of the heavy-lifting to fix Social Security. The only two proposals to garner a majority of public support involve raising the contributions and lowering the benefits for wealthier Americans. Raising the retirement age? Not so much. Just 35 percent tagged that as a Good Idea.
The Wealthy Work-Out
In 2010, the 12.4 percent Social Security tax is levied on the first $106,800 of earnings. Above that amount the tax disappears. Two thirds of poll respondents favor subjecting 100 percent of wages to the Social Security tax, effectively raising the contributions for wealthier Americans making more than $106,800. That potential fix was twice as popular as the idea of raising the Social Security tax rate for everyone (34 percent tagged that a good idea.)
A recent CBO study of a variety of Social Security fixes calculates that if the earnings cap was removed, it would indeed solve Social Security's long-term financing needs for 75-years (the standard testing term) assuming the extra contributions did not also come along with higher benefits. If benefits were raised to reflect the higher tax paid, the program would still be solvent to 2083.
But if the vox populi have any say in the matter, the wealthy won't be in line for increased benefits. Nearly two-thirds of Americans polled said reducing benefits for the wealthy was another good idea.
The Potential Tax Hit from Removing the Earnings Cap
According to the CBO:
The increase in taxes for high earners would be 12 percent, 15 percent, and 18 percent for people born in the 1960s, 1980s, and 2000s, respectively. The increase would be greater for people with the very highest earnings. Among people born in the 1980s, lifetime taxes would rise by at least 40 percent for people in the top 5 percent of lifetime earnings.
So What's the Timeline for a Fix?
Social Security is now becoming a hot topic of D.C. debate given the current focus on how to wrangle with the growing federal deficit, and it's likely to get plenty of face time this fall during mid-term election season. Then we've also got a Dec. 1 deadline for the president's bipartisan National Commission on Fiscal Responsibility and Reform to weigh in with its recommendations.
None of that suggests anything will happen in the short-term. When it comes to Social Security, kicking the can down the road is a time-honored approach. But if Washington does give deficit reduction a serious embrace, raising Social Security taxes for the wealthy would be one proposal that the rank and file say would be palatable.