Remove the Cap on Social Security
I am apolitical by nature. The entire process of electing representatives, from city councils to Presidents, leaves me cold. Blame my extraordinary microeconomics professor H. Scott Bierman who was at Carleton College then but now is the President at Beloit College. He helped me crystallize a handful of tangential thoughts about our system into a unifying theory regarding what governs human behavior, political or social.
But that does not mean I don’t read a newspaper, watch TV news, or occasionally surf the Interwebs to watch the latest follies in politics and government. And what I see regarding the Social Security system is the single silliest and ridiculous “problem” that our country faces.
I am quite fortunate that, just like many other people, I have the pleasure of reaching the payday in the second half of the year when my FICA disappears and I have extra money. Found money.
But why is it so?
I don’t work for the Government Accountability Office, but I am pretty sure that if there was no Federal Insurance Contributions Act (FICA) limit, if we all paid FICA all year no matter how much we earned, that we could solve the Social Security problem. Current law says that employees pay 6.2 percent FICA tax on the first $106,800 of earnings per year to help finance Social Security. People who are fortunate enough to make more than $106,800 pay zero FICA tax on every dollar they earn above that cap. Obama favors phasing out that cap slowly over a number of years. Romney would probably not favor this – he would likely rather see no FICA at all and a privatization of our retirement benefits. But if you are going to eliminate the cap, why not just do it once and have it done?
As anyone who knows me well would tell you, I am no supporter of taxes of any kind. They are a coerced transfer of wealth from the people to the government, who then can spend the money any way it pleases. None of our founding fathers envisioned that as the desired outcome, and rightly so. Nobody should ever be forced, either as a rule of law or to a mugger in the streets, to give up what is rightly theirs.
However, if there is going to be a tax, at least let us not make it regressive and punitive to those who earn less. FICA is the most regressive tax in our system. It favors those who earn more than the FICA cap, and it punishes those at or below the cap in terms of earnings. Given the potential for insolvency in the Social Security system, abolishing the $106,800 cap on FICA is the simplest and fairest road forward.
Eliminate the cap on FICA. Fully fund Social Security.
Then we can begin working on how to balance the books in a fairer tax system, one that taxes everyone equally, and one which finances a much smaller government apparatus. The possibilities are endless.
Take this first small step forward and eliminate the cap on FICA.