Sen. Elizabeth Warren came out last week with a dramatic proposal to expand Social Security benefits and make the tax base that funds the program sharply more progressive. Warren’s proposal doesn’t come out of nowhere. The Massachusetts lawmaker has been a proponent of expanding Social Security benefits since her first year in the Senate, and the idea that the government needs to do more to account for households’ basic financial needs has been integral to her thinking since long before that.
Warren’s plan aims to address solvency, expand benefits, and make Social Security much more redistributive. She also wants to further address several longstanding progressive concerns about Social Security, including the idea that it unfairly treats the poorest workers, the disabled, and people (primarily women) who spent many of their prime working years out of the paid workforce shouldering family care responsibilities. Those groups would all get additional benefits enhancements over and above the basic $200 increase in benefits that Warren is promising.
Obviously the idea of making benefits more generous across the board, paired with additional special enhancements, runs contrary to the notion that the big problem with Social Security is looming insolvency. To address that, Warren is proposing a rather hefty tax increase on the top 2% or so of the population. First, she wants to impose a 14.8% payroll tax (split evenly between workers and employers) on salaries above $250,000 a year. This would create a slightly odd program structure where the payroll tax phases out at $132,900 and then pops back into existence at $250,000. But the goal in creating that doughnut hole structure is to target the tax increase at the top 2% of American earners. Second, she wants to also impose a 14.8% tax on the investment income of people earning over $250,000.
In combination, these proposals would change Social Security taxes from something that’s not really a big deal for truly wealthy Americans into one that is. And paired with the big and extremely broad increase in benefits, it also turns Social Security into a serious vehicle for redistribution. Of course this program, like pretty much all the other big legislative proposals Democrats are rolling out in the 2020 cycle, is relatively unlikely to be enacted.
You can find the Vox article this post was taken from here and The Wall Street Journal’s take on it here.