Tracy Potter, Bismarck, column: Fix Social Security and boost the economy, too

By Tracy Potter

BISMARCK -- There seldom are simple answers to the most complex problems in government and politics. But sometimes, a simple and good solution does appear, and it meets opposition only because of stubborn adherence to the way things have been done in the past.

Last month, I proposed one simple solution to two multifaceted problems -- one current and one more long-range. The more immediate problem is unemployment, and the long-term problem is the health of Social Security.

Both problems would be addressed by having millionaire wage earners pay the same rate in FICA payroll tax as the rest of us.

Unemployment would be addressed by lowering the costs of hiring for every business whose payroll averages less than $106,000 per employee. That is virtually every business in North Dakota and most of the job-producing employers in America.

That's because the revenue generated by having every dollar of income taxed at the same rate would lower that FICA rate considerably, a tax break for 94 percent of people and their employers.

Social Security would be fixed forever by the infusion of more revenue from those most able to pay, and 94 percent of Americans would see a payroll tax cut, putting more money into their hands and helping the consumer economy recover as they spend it.

In America today, about 94 percent of wage earners make less than $106,000 per year; but, of course, they don't come close to earning that share of total wages. Every dollar of income up to $106,000 is taxed at 6.2 percent to pay for Social Security. Above that, the percentage falls to zero.

So, every low- or middle-income person pays a 6.2 percent payroll tax (which is matched by their employer), while people making $1 million a year pay 0.62 percent, and people making $100 million pay at one-thousandth the regular rate.

This looks tremendously unfair, but the justification is that there are no additional retirement benefits paid to the highest wage earners. That is the way the system was built and the way things have been done in the past.

In order for this plan to be effective, it is true that it needs to collect the additional revenue without increasing benefits for those who earn more than the current maximum, adjusted for inflation in coming years. So, the argument against my idea is that it would be unfair to tax the richest 6 percent of Americans for benefits they won't receive, at least not directly.

I would counterargue that the richest 6 percent would get the benefits of a healthier economy and a more secure nation. I also would argue that they are the people least in need of Social Security benefits.

The practical effect of my plan would be to put more money into the hands of those who spend it and those who employ people in the middle class. The plan also would give Social Security the money it needs to avoid dramatic increases in retirement age or cuts in benefits.

Doing a useful, practical thing is the definition of pragmatic. We need more of that in politics and government.

State Sen. Potter, D-Bismarck, is the Democratic-NPL Party's endorsed candidate for U.S. Senate.