This article is from the archives of the UB Reporter.


Published: March 3, 2005

What's wrong with raising Social Security income cap?

Dear Editor:

My colleague in Economics, Isaac Ehrlich, offered his opinion about Social Security in the form of a Q&A in the Reporter of Feb. 17. He suggests that the proposal to increase the income cap for paying Social Security taxes from the current $90,000 would represent a tax increase. For the vast majority of Americans earning less than $90,000, there would, however, be no tax increase at all. What's wrong with this?

I have seen a report that says that simply eliminating the income cap on payments would solve, until 2077, even the pessimistic estimates of a purported crisis by 2042 (actually the Congressional Budget Office says 2052, others say later). All dismissals of this possible change in Social Security law would, of course, only benefit the wealthiest in our society.

If the proposal to eliminate the cap is considered "too much" taxation for our poor rich, why not raise the cap significantly while also considering, say, a 0.1 percent tax on all security transactions, the revenue being paid into the Social Security system or dedicating some inheritance taxation on high wealth to Social Security?

Ehrlich promotes Bush's privatization: Everything else aside, please don't forget that all costs and profits to investment firms handling the new privatized accounts would have to come out of any possible incomes, thus representing a deduction from anything received by retirees under any privatization scheme.

Bush's proposals and Ehrlich's suggestions, in my opinion, are a bad deal for most Americans.

Exposition of the Bush administration pretensions of crisis in Social Security and implications of privatization can be found in a series of articles since December in The New York Times by Professor of Economics Paul Krugman, now at Princeton, formerly at MIT. His series can be accessed at under "columns" or a summary is offered in "America's Senior Moment," New York Review of Books, at http://www.nybooks. com/articles/17771.


Paul Zarembka
Department of Economics