Raising Social Security Taxes Means Big Cuts in Other Tax Revenues

Over at Forbes, I look at how increases in Social Security taxes – either eliminating the ceiling on wages subject to payroll taxes or applying Social Security taxes to investment income – could cause reductions in federal income taxes, Medicare payroll taxes, and state income taxes.

Assuming smaller effects of tax rates on taxable incomes, one-third to one half of Social Security revenue gains from eliminating the payroll tax ceiling would be offset by revenue losses elsewhere in the budget. Using assumptions that find a larger behavioral response, eliminating the Social Security tax max would raise only a small fraction of net revenues than is commonly assumed. Non-Social Security losses from Social Security reforms should not be a trivial concern for policymakers.

You can read the whole article here.