The Committee for a Responsible Federal Budget recently proposed a change that would limit annual Social Security benefits to $100,000 per couple or $50,000 per single taxpayer.
The so-called "Six Figure Limit" would aim to address projected future shortfalls and the insolvency of the Social Security trust fund.
We asked two professors and authors of Tax Facts with opposing political viewpoints to share their opinions about recent proposals to place a firm cap on annual Social Security benefits.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Their Reasons:
Byrnes: We must face the reality that the clock is ticking when it comes to fixing Social Security's financial problems. The system simply is not going to continue working in its current state indefinitely — so something has to be done to address the shortfall. Many Democrats want to put their heads in the sand and pretend that the system is working because they aren't willing to make the difficult decisions necessary to ensure that Social Security is still around for future generations. Imposing a cap is a practical solution that eliminates about three-fifths of Social Security's projected shortfall without resorting to irresponsible federal spending that would only further serve to increase the deficit.
Bloink: First off, this type of cap is completely unjustified — and it's also political suicide. Social Security is not an entitlement-based system, as many Republicans claim. Social Security benefits are earned by individuals who pay Social Security taxes on their income throughout their working years. This is exactly why Social Security benefit checks are calculated based on taxpayers' earnings records — they're earned benefits.
Byrnes: By some predictions, even existing beneficiaries may face a benefits cut as soon as 2032 — six short years down the road. The current system, which of course is based on income during working years, provides the largest benefits to the individuals who managed to earn the most money during their working years — so we're providing the highest benefits to the wealthiest Americans who had every opportunity to save and fund their own retirements during their working years.
Bloink: Yes, something has to be done to fix the Social Security system so that benefits can continue to be paid well into the future. Cutting benefits simply isn't the answer. We have a workable solution at our fingertips — remove the cap on Social Security contributions. The current system taxes every dollar earned by lower-income taxpayers while allowing the wealthiest taxpayers to stop paying Social Security taxes on dollars earned above the annual cap. Based on some studies, removing the cap could extend Social Security's solvency through 2090 without cutting existing benefits by a dollar.
Byrnes: This new CRFB proposal reflects the reality that the goal of Social Security is to provide stable retirement benefits and to supplement Americans' retirement income — not to make Americans who had the means to fund their own retirement accounts richer while the federal government goes further into debt.
Bloink: From a practical perspective, there's no way that a proposal like this one would ever become law — it's simply too unpopular with the American public. Those who receive higher benefits receive higher benefits because they paid more into the system during their working years. To cap Social Security benefits now would be to eliminate a benefit that taxpayers earned — and counted on — while they were working and earning income. As it is, most Social Security beneficiaries already feel that their benefits don't go as far as they used to. Cutting those benefits even further simply isn't the answer.
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