“No limit on the amount taxed” would be a perfect slogan for Bernie Sanders’ 2020 campaign, suggests James Freeman in the WSJ.
Free-Riding Artisanal Socialism
Or as Daniel Henninger writes in the WSJ, what we have today is “artisanal socialism free-riding on capitalism’s manifest success.”
Mr. Sanders was in the right place at the right time. The modern left, the children of the new, no-standards university system, went gaga for Bernie’s comic-book socialism. “Medicare for All!” Bernie shouted across the land. They sent him $25 online donations by the millions. And still do.
So here’s Bernie’s plan: stop pretending that Social Security is a retirement program in which “participants make contributions during their working years and then draw upon their savings in retirement.” Instead, as Mr. Freeman explains, Mr. Sanders would raise taxes on some participants and spend the money on others.
Higher Payroll Taxes/Nothing in Return
Americans earning high incomes should definitely expect that if the Sanders bill is enacted they will be paying higher payroll taxes and receiving nothing in return for the tax hike.
Currently the 12.4% Social Security payroll tax (6.2% is collected from employees and another 6.2% from employers) is applied to a worker’s first $132,900 in earnings.
The Sanders plan will also apply the full tax to earnings above $250,000.
A recent letter to Mr. Sanders and his legislative partner Rep. Peter Defazio (D., Ore.) from Social Security Chief Actuary Stephen Goss features an analysis of the proposal. For now, Messrs. Sanders and DeFazio are saying that their plan would raise much more in taxes than it would spend in new benefits. So the official forecast from Mr. Goss, who notes that the work of his office is “not consistent with estimates made by the Office of Management and Budget or the Congressional Budget Office” suggests that the plan will make the Social Security program go bust less quickly than under current law. But by tradition, taxpayers should not expect such forecasts to accurately predict changes in behavior as a result of rising tax burdens or expanding benefit packages.
Mr. Goss explicitly states that the plan will “not credit the additional taxed earnings for benefit purposes.”
As Mr. Freeman notes, “This is about redistribution, not retirement savings.”
Read more here.