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Culture War Roundup for the week of October 2, 2023

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Raise Payroll Taxes - “even a modest change, such as a gradual increase of 0.3 percentage points each for employees and employers (or less than $3 per week for an average earner), could close about one-fifth of the gap.”

Yes, this is extremely important. Whenever people discuss Social Security they often act like the funding shortfall some irresolvable apocalyptic problem when really a moderate increase in rates can close the gap. From the latest trustees report;

consider that for the combined OASI and DI Trust Funds to remain fully solvent throughout the 75-year projection period ending with 2097: (1) revenue would have to be increased by an amount equivalent to an immediate and permanent payroll tax rate increase of 3.44 percentage points to 15.84 percent

Considering the possibility you mention of raise the cap, the actual tax increase needed without touching benefits would be decidedly moderate. And the above figure is all the way to the end of the century!

That is a huge tax increase though. For a median household that is an additional $2565 which is more than my rent and we are not even close to a median household. You are talking about a tax increase equivalent to 5+ car payments, 2x rent payments, etc.

Where did you get that number from? In 2017 the average person paid about $3,045 in SS tax. Even if you multiplied that by two for a household, a 3.44% increase in the tax wouldn't come close to $2565.

Remember that even though workers really shoulder the full burden of the tax, half of it comes from your employer's account so that's not literally a 3.44% increase on whatever your takehome salary was before.

I took median household income and multiplied.

Your mistake is not doubling your 3045 number.

Even if you multiplied that by two for a household, a 3.44% increase in the tax wouldn't come close to $2565.

$2565 is the median household income multiplied by 0.0344. Unless you are increasing the 6.2 (x2) % SS tax by merely 3.44% which would take the total tax rate to 12.8% instead of 12.4% (while I thought you were increasing it from 12.4 to 15.88%) my math works out perfectly.

Remember that even though workers really shoulder the full burden of the tax, half of it comes from your employer's account so that's not literally a 3.44% increase on whatever your takehome salary was before.

But that makes it worse, not better. If you have an ostensible 100k salary, your take home after SS payroll taxes (ignoring everything else for now) is 93.8k. But you aren't actually a 100k salary employee. Your post-payroll cost to your employer is 106.2k. So you are actually a 106.2k employee. That is, the take home pay of an employee "worth" $100k to an employer is significantly less than 93.8k it is actually around 88k. Because your adjusted base pay ends up coming down to around $94k, and then you lopp 6.2% off that ("the employee part of SS" and you are down to 88. All of the 3.44% is eventually born by employees. It doesn't "come from the employers account" it comes from you having a reduced wage. That some people are not informed enough to realize this, and as a result we get slightly less rioting from the working class, doesn't make it not true.

But you aren't actually a 100k salary employee. Your post-payroll cost to your employer is 106.2k.

But the way you calculated your number is by taking the sticker salary, 100k, and applying the full 3.44% tax there instead of to the real 106.2K, which is why your estimate is higher than it should be. Or, more specifically you took the median household income, $74,580, and multiplied by 0.0344, when the total median compensation for purpose of tax burden is $79,203. If you're going to use sticker salary that's fine, but then you should multiply by 0.0172, which is $1282, half of what you cited. Do you seem what I'm trying to point out?

This is also of course the most extreme solution, equivalent to funding the full 75 year projection window. In reality we likely won't raise it anywhere near this high, we can't even agree on the proposal to raise the tax by $3/week/person to close the gap by a fifth.

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