New Hampshire U.S. Sen. Maggie Hassan has endorsed a $150 billion income tax hike as part of a strategy to keep Social Security and Medicare solvent.
“I have long supported lifting the cap on income where people contribute to the program,” Hassan told a group of business leaders during a New England Council event Monday morning at the New Hampshire Institute of Politics.
Currently, Americans only pay FICA (Federal Insurance Contributions Act) taxes on the first $160,200 they earn. Social Security tax rates have always been capped under the policy that it should be treated as a retirement account, not a welfare check. When Social Security taxes were first implemented, they were capped at the first $3,000 of earnings. Adjusted for inflation, that would be around $58,000 today, according to the Peter G. Peterson Foundation.
Lifting the cap would raise taxes by $150 billion a year.
Raising the cap, or even “smashing the cap,” as Hassan supports, isn’t a new idea. In 2011, President Barack Obama said he supported the idea, though he avoided specifics. At that time, the cap was $107,000, or 50 percent lower than it is today.
In 2019, state Sen. Jeanne Dietsch (D-Peterborough) proposed a state version of lifting the cap. She wanted to impose a state income tax at the 6.5 percent Social Security tax rate on income above the federal cap, raising taxes by an estimated $313 million yearly. Dietsch called it “closing the loophole.”
Her fellow Senate Democrats were so horrified by the proposal they voted to kill it. Then, when a procedural issue was raised, they voted to kill it again — just to be sure. And Dietsch was soon defeated at the ballot box herself.
Hassan acknowledged during her 2022 reelection campaign that she supported raising the income cap “so the wealthy can pay a little more,” though she wasn’t as clear on eliminating it entirely as she advocates today.
Fiscal hawks say raising taxes, even on top earners, is the wrong approach to keeping Social Security solvent.
First, the Congressional Budget Office said lifting the cap entirely “would delay the exhaustion of the combined trust funds by 13 years, until calendar year 2046.” So a massive tax hike only offers a temporary fix.
“Sen. Hassan’s ‘solution’ would turn Social Security into a welfare program rather than an earned benefit,” said Grover Norquist with Americans for Tax Reform. “It means not reforming Social Security, but instead merely delaying its collapse.”
A March 2023 report from the Social Security trustees moved up the date when Social Security would run short of funds to 2033.
Social Security will be insolvent even sooner than previously expected, with automatic benefit cuts now projected to occur in 2033, according to a new report released Friday by the program’s trustees.
Hassan declined to answer questions about her tax hike proposal after her speech, fleeing to a backroom when approached by a reporter.
“There are other bipartisan efforts to look at ways we can shore up Social Security without changing benefits for people who have paid into it. And we want to make sure that it’s there for the long run.”
