Since growing inequality reduced the taxable share of covered earnings from 90 percent in 1983 to 84 percent in 2010, one way to frame the issue is to ask what would happen if the process were reversed. The 2012 trustees report assumes the taxable share will continue to decline before leveling off at a slightly lower level, though it doesn’t provide detailed projections or an alternative “low-cost” scenario. However, the Social Security Advisory Board’s 2011 Technical Panel report suggests that increasing the taxable earnings share from 80.0 percent to 84.3 percent would reduce the actuarial deficit from 2.00 to 2.47 of payroll. Extrapolating from these estimates (which were done by the Social Security actuaries on behalf of the Technical Panel), restoring the taxable share to 90 percent could reduce the 75-year shortfall by 1.09 percent of taxable payroll, or 41 percent (1.09/2.67), assuming a linear relationship between the taxable payroll share and the 75-year actuarial balance.
Thus one way to reduce the shortfall for Social Security would be to raise the federal minimum wage–for some reason I haven’t heard this talked about. She also notes that the percent of income that Social Security replaces has already been going down–for example, for lower wage workers it peaked at about 70% in 1981 and is now about 58%. Social Security has a page with estimates for changes in the shortfall with a large range of possible changes to the tax structure.
Kevin Drum links to this report which has this summary table:
So, they predict it would reduce the deficit by about $19 billion over ten years–that’s pretty pathetic, especially considering that the CBO estimates that it will mean 500 thousand more people will not have health insurance. This also doesn’t look at increased amounts that will be paid by states (through Medicaid) and individuals. It’s just a stupid thing to do and yet I will venture to guess that columnists will still consider it the ‘adult’ thing to do.