Democrats hide when asked about ending high-income loophole to assure Social Security’s future

Original Reporting | By Samantha Cook |

April 10, 2013 — For all the talk of the Social Security system running out of money, it is well established that raising or eliminating the cap on the wages subject to payroll taxes would guarantee a healthy Social Security system for many decades, and do so without cutting benefits or raising the retirement age.

put your cards on the table

Narrowing or eliminating the exclusion of earnings above $113,700 from Social Security taxation may or may not be a good idea, but it is surely a matter central to the public policy choices to be made, and is a matter of significant public interest.

We call on our colleagues in the press to pose the questions we have asked until each senator has given answers fully responsive to those inquiries.


Public support for elimination of the payroll tax cap is high. According to a National Academy of Social Insurance Survey conducted in 2012, 68 percent of Americans favor eliminating the cap.

Only the top 5.2 percent income earners would pay more in payroll taxes if the cap were completely eliminated; if the cap were eliminated for income over $250,000, only the wealthiest 1.3 percent would pay more. Both estimates come from the Center for Economic and Policy Research.

Nevertheless, these routes to ensuring the promises made to workers that they could rely Social Security benefits are kept is little discussed on Capitol Hill. And even though the national Democratic Party has presented itself as the defender of Social Security, Remapping Debate discovered a profound unwillingness among most Democratic senators to identify their position on the issue. 


A deeply regressive system

Currently the payroll tax only applies to income up to $113,700. Any income above that amount is exempt from the tax. Senator Tom Harkin (D-Iowa), a supporter of eliminating the exemption, frames the impact of the cap starkly: “As it currently stands, payroll taxes apply to every dollar of earnings for a janitor making the minimum wage, but a professional athlete making $1 million a year pays only payroll taxes on approximately one-tenth of their earnings.”

Dean Baker, co-director of the Center for Economic and Policy Research, pointed out that the payroll tax is especially regressive not only because it applies only to wages and not to capital gains, dividends, or other forms of capital income (all of which overwhelmingly go to high-income people), but also because the cap on earned income subject to the tax means that the more money you earn the smaller percentage of total income you pay.

“Once you hit $113,000 you’re paying in…roughly $14,000…whether you’re right at $113,000 or whether you’re at a million. Obviously it’s a much smaller share of the person earning a million’s income than the person earning $113,000,” he said.


The impact of raising or eliminating the cap

Studies from the Social Security Administration have shown that a modification or elimination of the payroll tax cap would greatly increase the long-term solvency of the Social Security Trust fund.

The questions most senators
didn’t want to answer

Here are the questions we emailed to the press offices of Democratic and Independent Senators who are not sponsoring or co-sponsoring a bill to modify the existing cap on income subject to payroll taxes:

1. Does the Senator dispute the studies showing the impact of a partial or full elimination of the cap on earnings subject to payroll tax? If so, what is the contrary evidence?

2. Does the Senator support any increase in the wages subject to payroll tax (in other words, any narrowing of the current exemption for all income above 114K)? If not, why not?

3. It’s been found that only the top 5.2 percent wealthiest Americans would pay more Social Security tax if the cap was eliminated entirely and only the top 1.3 percent would pay more if the cap was lifted for income over $250,000.  Does the Senator dispute these data? If so, what is the contrary evidence?

4. According to a 2012 National Academy of Social Insurance Survey, 68 percent of Americans support eliminating the payroll tax cap. Why does the Senator believe that the wishes of this large majority of Americans has been ignored?

Eliminating the exclusion from payroll tax of income above $250,000 (without any change in current benefits) would insure the program’s solvency for almost 50 years. Eliminating the exclusion entirely (without any change in current benefits) would insure solvency for almost 65 years. Even if benefits were enhanced under a system where there was no payroll cap, (increasing benefits for those earning more than $113,700, along with their increased contributions) there would be full solvency assured until 2061.


Legislative proposals

There have been several proposals this congressional session to eliminate or adjust the cap. Senator Mark Begich (D-Alaska) proposed a bill in February (re-introduced from December 2012) that would phase out the payroll tax cap, as did Sen. Harkin in March. Sen. Begich’s bill is co-sponsored by Senator Mazie Hirono (D-Hawaii), while Sen. Harkin’s bill has no co-sponsors. 

Also last month, Senator Bernie Sanders (I-Vt.) proposed a bill to apply the payroll tax to income above $250,000.The legislation was patterned after a proposal President Obama made during his 2008 presidential campaign to lift the cap for income above $250,000 (and is consistent with the President’s 2008 pledge not to raise taxes on households with income less than $250,000).  

This bill is co-sponsored by Senators Richard Blumenthal (D-Conn.), Barbara Boxer (D-Calif.), Al Franken (D-Minn.), Amy Klobuchar (D-Minn.), Patrick Leahy (D-Vt.), Claire McCaskill (D-Mo.), Harry Reid (D-Nev.), Brian Schatz (D-Hawaii), and Sheldon Whitehouse (D-R.I.).


Canvassing the senators

In the period from March 19 to March 29, Remapping Debate reached out repeatedly, both through phone calls and email messages, to the remaining 42 Democratic and Independent senators who had co-sponsored neither Sen. Begich’s nor Sen. Sander’s bill, nor proposed their own bills to eliminate or modify the payroll tax cap.

After a few days of calling and emailing without receiving responses, we emailed a list of questions to the press offices of the relevant senators in order to maximize the opportunity for them to respond by our deadline (see “The questions most senators didn’t want to answer”).

We contacted each senator’s press office repeatedly, in most cases at least six times. Most all either replied to the email but were unresponsive to the questions, refused to comment, claimed to be too busy, stopped responding after initial contact, or simply did not answer at all.

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