Raising Social Security taxes to save benefits for retirees – Won’t just affect the rich

Social Security has always been one of the main topics of discussion in presidential elections, and this year is no exception. This year the topic has been raised more than usual due to the projected depletion of the Social Security Trust Funds in 2035 at the latest, according to data from the Congressional Research Service. The depletion of the Trust Funds is not a new concern politicians and experts alike have been expressing their worry over the financials of the program for years.

The reality of the Social Security financing crisis

Established in 1933, Social Security has helped retirees, disabled people and their families stay in a financially stable situation for years. Thanks to the program, every year more than 20 million people stay above the poverty line and, without it, the amount of Social Security beneficiaries that would be plunged back into poverty could increase by more than 50% by 2045.

The program works as a pay-as-you-go system, where current workers pay taxes on their income that in turn support current retirees and other beneficiaries. The problem with the system, is that today there are more beneficiaries than workers to support them, and the program has been drawing funds from the Trust to support benefits. This does not mean that if the Trust were to be depleted benefits would stop, but if no congressional action is taken soon, only 83% of benefits will be able to be paid out.

There is, of course, a solution to the funding crisis, and that is to address the shortfall of the program, but even as solutions have been proposed on both sides of the political aisle, no consensus has been reached.

Solutions to the program’s shortfall

Both Republicans and Democrats have proposed some solutions to fix the shortfall of the program and have used the general election to platform their ideas.

Republicans overall advocate for benefit cuts and raising the retirement age to 70, but former President Donald Trump does not seem to agree with the party line. On the campaign trail, he has made clear statements promising to neither “cut one penny from Social Security” nor raise the retirement age, but he has not backed these statements with a comprehensive plan. He has walked back those statements by also promising to be open to Social Security cuts, a direct contradiction.

On the other hand, Democrats, amongst which we find Vice President Kamala Harris, advocate for shoring up the program and making “millionaires and billionaires pay their fair share in taxes.” Although there is also no comprehensive plan to draw from, the numerous bills that have been introduced by the party to increase taxes on the wealthy or tax a higher portion of income (Social Security payroll taxes in 2024 are capped at $168,000) can give potential voters an idea of the measures they can expect.

So much so that Monique Morrissey, a senior economist at the Economic Policy Institute has declared that “People are shocked to learn that rich people don’t pay taxes above [the cap].”

One of the bills that was introduced by President Biden to bridge the gap is one that taxed for Social Security all income above $400,000. This would give a reprieve to families earning between the cap and this number and would create additional funds for the program. But Morrissey thinks that it is not enough and that all income should be taxed, arguing that “The Democrats need to lose that pledge [of not raising taxes on anyone making less than $400,000]. People are happy to pay more in taxes when it’s something that they see is concretely benefiting them.”

Raising taxes, especially for the wealthy, is usually an unpopular measure, which is why politicians are reluctant to put forth proposals that include a hike. Gopi Shah Goda, director of the Retirement Security Project at the Brookings Institution advocates for a mixed approach stating “It’s perfectly reasonable to think about solving a problem with some mix of revenue increases as well as benefit reductions.”