While Republican presidential candidate Mitt Romney may be considered the “reasonable” candidate in the GOP field, his statements on Social Security are just as false and outrageous as any other candidate’s claims. In fact, Romney has been consistently wrong on Social Security—on payroll tax increases, removing the cap on taxable income, and public opinion. Below is a breakdown of his statements about Social Security, along with the facts that he seems to ignore.
PAYROLL TAX INCREASES
Romney: “Do you know what the tax rate would have to be to honor the promises of Social Security, Medicare, and Medicaid if we just raise taxes and leave the programs as they are? Right now those programs take a payroll tax out of your earnings of 15.3 percent. That would have to rise to 44%. We’re not going to do that.” (Iowa State Fair, August 11, 2011.)
The Truth: Romney’s statement refers to the combined taxes for Social Security and Medicare Part A. The real estimated payroll tax necessary to fully fund these programs over the long term is 21.3% (or 10.65% for the employee and 10.65% for the employer) if taxes were to be increased equally for people of all income levels.
Guaranteeing the solvency of Social Security alone requires a remarkably modest tax increase. Currently, Social Security is financed by a 12.4% payroll tax—6.2% from employees and 6.2% from employers. In order to guarantee solvency for the next 75 years, payroll taxes would have to be raised by a meager 2.1%, or by about 1% for employees and 1% for employers, according to the Social Security Administration’s Chief Actuary.
With regards to Medicare, the conservative Heritage Foundation published a report, “Medicare Solvency, How to Get There,” estimating that the tax increase needed to cover the Part A deficit was 3.89%, increasing the current tax of 2.9% to a total of 6.79%.
The bottom line: Using the estimates available from the Social Security Administration and the conservative think-tank Heritage, the estimated payroll tax necessary to “keep the promises we’ve made” is 21.3% if taxes increase equally for people of all income levels. This is a far cry from Romney’s 44%, which is not substantiated by any reputable source. The only part he gets right is “we’re not going to do that,” because well, we don’t have to.
REMOVING THE CAP ON EARNINGS OVER $106,800
Romney: Removing the cap on earnings taxed for Social Security “doesn’t begin to solve the problem.” (Town Hall in Berlin, New Hampshire, August 16, 2011.)
The Truth: Removing the cap on earnings taxed for Social Security would actually create a budget surplus for the program over the next 75 years, if the present maximum benefit limit were to remain in place.
If you think it’s unfair to collect higher contributions without increasing the maximum benefit (Romney doesn’t think the wealthy should be “punished” for their success), you could remove the current limit on benefits and allow higher contributions to count toward higher benefits. Even under this provision, removing the cap solves 99% of the budget shortfall.
The bottom line: Again, Romney is just plain wrong. Removing the cap on taxable income without increasing benefits to the highest earners would more than eliminate the budget shortfall. If we want to maintain the link between contributions and benefits, the shortfall is reduced by 99%. I’m not sure where exactly you “begin to solve the problem”, but a solution that gets you 99% of the way there seems pretty good to me.
WHAT AMERICANS WANT
Romney: “My guess is [people] are going to say, give me lower benefit growth but don’t raise my taxes.” (Town Hall in Berlin, New Hampshire, August 16, 2011.)
The Truth: Polls show that Americans prefer tax increases to Social Security benefit cuts. A June 2011 Pew Research Center poll asked Americans what they thought was more important: to avoid future Social Security tax increases or to avoid future cuts to Social Security benefit amounts.
Out of the total population polled, 56% said that avoiding benefit cuts was more important, compared to only 33% who said that avoiding tax increases was more important. In other words, a majority actually said that they would prefer to see higher taxes than lower benefits.
Maybe when Romney said “people,” he actually meant his Republican constituents. But there’s a problem there too, since Pew divided their responses by political party. Of Republicans, 49% said that avoiding benefit cuts was more important, compared to 43% who said that avoiding future tax increases was more important. So even with Republicans, more voters support raising taxes if that’s what’s necessary to avoid benefit cuts.
The bottom line: No matter whom you ask, Americans feel more strongly about preserving benefits than they do about avoiding tax increases. Romney can guess all he wants, but if he even glanced at the polls, he would know that people, including Republicans, do not want to see their benefits cut, even if this means raising taxes.
Romney’s statements on Social Security are uniquely dangerous: he masquerades his misinformation as “fact,” convincing listeners that there’s logic behind the benefit cuts he proposes. There are certainly tough choices to be made about Social Security’s future, but there’s a big difference between “tough choices” and “false choices.” It’s a shame that the most reasonable candidate in the race won’t even tell voters what their choices really are.