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PaperclipPerfector  7mo ago (text post)   29323 thread views

Culture War Roundup for the week of October 2, 2023

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What makes you say this, based on the CBO report that raising the cap could raise an extra trillion?

The government will somehow find a way to come up short.

I think what’s getting left out is how 1) this probably won’t raise an extra trillion, because wealthy people use tax avoidance strategies(and to my knowledge payroll taxes are specifically on wages, not on passive income- eg ceo pay is often structured to give compensation in terms of assets which appreciate to reduce tax burden, and it’s not inconceivable that this could extend down the ladder to cope with a sudden large tax increase on high wages) and 2) inflation isn’t going away, so social security outlays are going to continue to rise because they’re inflation adjusted(which is absolutely ruinous to an optimistic planning model for a pay-as-you-go system based off of payroll taxes when wages rise slower than inflation), and also people are living longer(and thus drawing social security for longer). Yes, yes, I know that average US life expectancy is dropping, but that’s mostly due to premature deaths of people who wouldn’t have drawn much social security anyways- both because they weren’t going to push the average lifespan up regardless, and because they were poor and social security outlays are tied to your working income.

Agreed that part of the problem with taxing wages is that businesses can respond by shifting compensation, generally to benefits. That's one of the problems "option 3: Widen the tax base" is trying to account for. Worth noting though that payroll tax is already considered the hardest to dodge:

payroll taxes are very hard to evade. According to the IRS’ criminal enforcement data, investigations into payroll tax abuse make up less than 3 percent of all tax investigations, despite payroll taxes generating about a third of all federal tax revenue.

I'll also note that the (conservative, pro-low tax) Tax Foundation has similarly ambitious estimates for raising the whole cap:

removing the payroll tax cap entirely would lead to $1.8 trillion in additional federal revenue over ten years on a static basis, and primarily impact high-earners. Furthermore, this additional revenue could be used to lower marginal rates on corporate and personal income, growing both wages and GDP by 2.2%, while still raising revenue.

Alternatively you could take the option of raising taxes very slightly on normal people, or even just tax capital directly if we really want to be sure the rich to pay.

Hmm. That significantly changes my priors towards raising the cap significantly improving the health of social security. I do still think the ‘outlays are higher than anyone expected’ problem is going to get worse, however.

This seems like an uncharacteristically low effort take from you.

That’s true. I’ll edit in a steel man to one of my posts above when I have more time to think about what that entails.

No worries & no rush

All right, it’s in the post two above that one.

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