Don't Raise Social Security Taxes: But If It's Necessary, Here's How
American Enterprise Institute for Public Policy Research, No. 1, January 2013
4 Pages Posted: 6 Jun 2013
Date Written: January 22, 2013
As the debt-ceiling debate begins, congressional Republicans will demand spending cuts to counter any increase in the debt limit. These spending cuts are likely to include entitlement reforms, with Social Security, particularly, as a prime target. Most congressional Democrats might favor payroll tax increases to make Social Security solvent. But higher taxes discourage work and personal saving and encourage early retirement, with negative consequences for the economy. Although these increases clearly are not the best way to solve America’s overall entitlement problem, they may be necessary to consider if an agreement is to be reached. If so, payroll tax increases should be levied across the board, not merely on high earners, to reduce the economic impact and make all Americans aware of the costs of the benefits they all receive.
Keywords: Social Security, taxes, entitlements, retirement
JEL Classification: H55, H24, J26
Suggested Citation: Suggested Citation