Sanders’s Social Security Tax Plan Would Discourage Work and Investment | Cato’s Romina Boccia
Senator Bernie Sanders is promising to increase Social Security benefits by $2,400 a year and extend the program’s solvency by “scrapping the cap” and taxing wealthy Americans. The Cato Institute’s Romina Boccia, director of budget and entitlement policy, argues that the proposal would impose substantial economic costs while avoiding needed reforms to unsustainable benefit growth.
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Eliminating the payroll tax cap wouldn’t even cover the benefits Congress has already promised, let alone fund an expansion,” said Boccia. “Sanders’s full plan goes much further, adding substantial taxes on investment and business income. His plan is essentially robbing Peter to pay Paul, with the added cost of making Peter poorer in the process. You can’t tax your way to greater prosperity by undermining the investment and growth needed to expand the economic pie.
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Boccia highlights three concerns:
- Higher taxes would discourage productive work. Eliminating the cap would sharply increase marginal tax rates on affected workers, reducing incentives to work additional hours, postpone retirement, and acquire valuable skills. Top marginal tax rates would reach 60 percent across many states.
- Patients could face reduced access to physicians. Research with Krit Chanwong finds that approximately eight in ten surgeons and six in ten physicians earn above the cap. And among those affected, 27 percent of surgeons and 33 percent of physicians are 55 years of age or older. Some could respond by reducing hours or retiring sooner.
- Social Security’s revenue gains would overstate the improvement in federal finances. Higher taxes can reduce earnings, investment, and taxable capital-gains realizations. Sanders’s tax increases would reduce revenue elsewhere in the federal budget.
“Congress should focus Social Security on protecting against poverty in old age while letting workers keep more of their earnings to save and invest,” Boccia said. “Expanding promises Washington cannot afford would sacrifice economic opportunity for larger government checks.”
If you’re interested in speaking with Romina boccia about Sanders’s proposal, Social Security’s financing shortfall, or alternatives to large tax increases, please contact Cato PR at pr@cato.org.
Source: https://www.cato.org/news-releases/sanderss-social-security-tax-plan-would-discourage-work-investment-catos-romina
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