There is such hysteria about the problems facing Social Security, that it's easy to forget a simple fact: Much of the program's shortfalls in future years will go away if we just raise payroll taxes. And, as it turns out, that solution is more popular with the public than cutting benefits.
This is the finding of a new AP/GfK poll released yesterday.
When respondents were asked whether they favored higher taxes to keep benefits as they are or cutting taxes and reducing benefits, 53 percent opted for tax hikes and 36 percent wanted to cut benefits.
Other polls have found the same thing, of course, and one reason Americans are willing to shell out more for Social Security is that the program enjoys very strong support and, in general, Americans are willing to pay higher taxes for more government when they think the public sector is doing a good job.
At the same time, this poll showed equally strong backing for one of the bad ideas for bolstering Social Security: raising the retirement age. Just over half of respondents said they'd prefer keeping benefits at the same level and raising the retirement age, as opposed to cutting benefits but keeping the retirement age the same.
Unfortunately, the poll didn't ask the obvious question: Which is whether people would rather raise taxes or raise the retirement age to maintain current benefits.
It's good to know that the public is okay with a revenue fix for Social Security, since that's the best solution to future shortfalls. In particular, raising the cap on how much income is subject to Social Security taxes makes sense. That cap -- currently set at $106,000 -- has fallen below historic averages. If we raised the cap so that 90% of earnings are covered by the payroll tax, so that $200,000 of wages would be covered by 2020, that would partly address Social Security's shortfall.
Getting rid of the cap altogether would make a much bigger dent in the shortfall, but still not close future gaps. In any case, I don't favor this option because it could undermine high public support for the program. One reason Social Security is so popular is because its universal and redistributive qualities have been wisely calibrated. The wealthy subsidize lower-income recipients, but also get benefits themselves. However, if the contributions of the rich get too out of whack with their returns, the program will seem more patently like a bad deal. Better to raise revenues from the wealthy in ways that don't make Social Security out to be the bad guy.
Raising the cap, and also raising the payroll tax for everyone, is another option that would go a long way to ensuring Social Security's solvency. The price here is that the payroll tax is regressive and hits lower income workers hard. On the other hand, these workers do well on the back end, when they receive much more in benefits than they put in, so this seems fair. Meanwhile, slightly reducing the benefits for higher income recipients -- who often don't need the money -- is a palatable way to make the rich pitch in more, in addition to raising the cap.
What's important here is that higher taxes to bolster Social Security aren't anathema to voters. Rather, they seem like a reasonable price to pay to strengthen a popular program.