The Wrong Way to Fix Social Security

Sen. Bernie Sanders has a plan for making Social Security solvent. As the program exists today, no dollar above $106,800 is subject to Social Security taxes. If we remove that tax ceiling, Social Security is basically fixed forever. Sanders' argument:

An individual who earns $106,800 pays the same Social Security tax as a multimillionaire. That's wrong.

It certainly seems wrong when you stop there. But Social Security isn't just a tax system. It's also a benefits system. An individual who earns up to the taxable ceiling will pay the same tax as the millionaire and receive the same benefit as the millionaire. Millionaires pay far less of their salaries into Social Security, and Social Security replaces far less of millionaires' salaries after they retire.

Moreover, unless we change the benefits structure, taxing millionaires up to their last dollar will mean including their last dollar in their retirement benefits. That means the federal government will be paying some multimillionaires with 401(k) plans the size of their private yacht tens of thousands of dollars a month for decades after they retire. That seems wrong, too.

Sanders continues:

According to CBO, applying the tax to all income would provide all the revenue that Social Security needs for the foreseeable future -- for our kids and grandchildren and great grandchildren.

Raising taxes on the top sixth of earners by 12.4 percent will solve a lot of fiscal problems because it's an extraordinary tax hike. According to the CBO, under Sanders' plan, lifetime taxes for the today's young workers would rise by at least 40 percent for the top 5 percent of earners.

It's one thing for an elected representative to say "Hands off, Social Security" because he actually doesn't want anybody to put their hands on Social Security. It's another to say "Hands off" before suggesting that we raise lifetime taxes by at least 40 percent for the top 5 percent of earners. That's a pretty handsy suggestion.