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INCREASE IN FICA CAP? COUNT ON IT.
February 17, 2005
The President has said he won't rule out increasing the amount of salary and self-employment income subject to self-employment tax. This almost guarantees that any Social Security reforms will include a singificant increase in the FICA base (currently $90,000).
Whether this will be enough to move Congress from converting social security from an entirely unfunded transfer payment system to something resembling a funded retirement plan remains unclear.
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Comments
IIRC, this cap was set in 1984. I'm not necessarily uncomfortable raising it every 20 years.
I still don't see how this would significantly impact the long term problems with SS, tho.
Posted by: H Stern | February 17, 2005 1:36 PM
Well, it has been indexed.
Posted by: Joe Kristan | February 17, 2005 1:46 PM
> indexed
Which is, I suppose, good. I guess I'm saying that raising the cap:
1) doesn't seem particularly egregious
and
2) doesn't seem to be any kind of serious solution (on its own) to the long term problems facing SS
Or am I missing something?
Posted by: H Stern | February 17, 2005 2:54 PM
Because high rates are economically inefficient. I'd prefer that they get rid of the cap altogether and set the rate at a revenue neutral percentage (probably around 5% instead of 12.5%). The should also means test (based on wealth and income) receipt of benefits so Bill Gates and Warren Buffet don't get a monthly SS check when they turn 65. Once it becomes a true welfare program it will lose a lot of its popular support and real reforms are easier to implement as you ratchet down the participation to less than a majority of voters.
Posted by: Chad | February 17, 2005 4:28 PM