At some point during a debate in 2016, Hillary Clinton is going to be asked a question about the finances of Social Security. If she advocates kicking the can on the program’s deficits, she is going to be ravaged by the Republicans and the mainstream media for fiscal irresponsibility. How should she deal with this?
FICA is not imposed on wages over a specified threshold. As a result, overall marginal tax rates for moderately affluent workers actually go down once the threshold has been exceeded. This is a product of the dual nature of Social Security as both a insurance program and a safety net; as a welfare measure, the threshold makes no sense, but as an insurance program, it does, because SS benefits do not increase beyond a second specified limit. Which of the two natures of the program should prevail on this point is, or at least should be, an open question.
It is doubtful that most Americans are aware that people making, say, $150,000 a year have a lower overall (income plus FICA) marginal tax rate than those making $100,000. It is equally unlikely that they would approve if they knew. If Mrs. Clinton suggests removing the cap (with some possible countervailing adjustments to the benefit threshold, as well), she would provide a fiscally responsible solution to the SS deficit, while at the same time striking a blow against inequality and addressing an apparent inequity in the system. That approach should be infinitely more popular with the average American worker than an increase in the retirement age.