Biden's Social Security Tax Expansion

In the wake of the payroll tax holiday blessed by the Trump administration, Democratic presidential candidate Joe Biden has proposed his own Social Security tax plan. Under current law, all taxpayers only pay the Social Security tax on their first $137,000 worth of income. Biden’s plan would keep that rule, but would reinstate the payroll tax on income in excess of $400,000. In other words, only income between the annual earnings cap and $400,000 would be exempt from the Social Security tax.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about this potential new rule and its impact.

Below is a summary of the debate that ensued between the two professors.

Their Votes:

Bloink

Byrnes

Their Reasons:

Bloink: Right now, Trump has blessed a payroll tax holiday that has the potential to severely diminish—if not gut—the Social Security reserves. Countless Americans rely upon Social Security today and with waves of baby boomers retiring every day, countless more will be counting on Social Security to shore up their retirement savings—if not provide a primary source of income. We need to find a way to keep the system solvent without cutting benefits. Biden’s plan ensures that the wealthy pay their fair share without punishing ordinary middle-class Americans.

Byrnes: Biden’s plan to exempt income between $137,000 and $400,000 from the payroll tax, while forcing the highest earnings to shoulder even more of the burden, is completely arbitrary. The Social Security tax isn’t a general revenue tax. It’s directly tied to taxpayer’s eventual receipts from the system. It makes no sense to require higher income taxpayers to pay more without a corresponding benefit.

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Bloink: The Social Security trust could run dry in just a few short years. We need to take some type of action now to avoid much more drastic action down the line. Allowing the system to fail isn’t a realistic option. We’re going to have to take reasonable action today or see extremely steep tax hikes or benefit reductions for a particularly vulnerable class of Americans in the near future.

Byrnes: If we want to increase Social Security taxes on higher income Americans, we also need to change the fundamental system itself. Democrats love to say that Social Security is an entitlement system. You get back income based on what you pay in. Well, if we’re going to force a group of taxpayers to pay more into the system, they should fairly be entitled to get more out of it.

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Bloink: Americans who earn more than $400,000 per year are the least likely to be reliant on Social Security as a source of income in retirement. It’s not feasible for this nation as a whole to allow millions of retirees to slip into poverty because the rich aren’t willing to pay their fair share. Allowing that type of result would be catastrophic to everyone—including the wealthy who oppose this tax. I do think there might be better ways to go about this—considering that the top earners are also the most able to manipulate their on-paper income—but this plan is a good start.

Byrnes: Biden’s plan fundamentally changes the Social Security system into a welfare fund for lower earning Americans. That’s just not what the system is set up to do. I agree that we need to do something to shore up Social Security for future generations. I don’t believe that requiring a certain group of Americans to shoulder the burden is the right way to go about it.