Obama on Social Security
I do not want to cut benefits or raise the retirement age. I believe there are a number of ways we can make Social Security solvent that do not involve placing these added burdens on our seniors. One possible option, for example, is to raise the cap on the amount of income subject to the Social Security tax. If we kept the payroll tax rate exactly the same but applied it to all earnings and not just the first $97,500, we could virtually eliminate the entire Social Security shortfall.This seems to be a shift from his past statements and puts him closer to Senator Clinton.
Under this plan, the top marginal tax rate (including federal income and payroll taxes, but not state taxes) would rise from 37.9 to 50.3 percent.
Correction: The first comment points out that my calculation was not quite right:
To correctly count the employer's 7.65% of payroll taxes as a marginal tax (and it is), we have to also include it as income. Thus, for someone in the 35% tax bracket who earns an extra $1 in income, pays 7.65% in payroll taxes and whose employer pays 7.65% in payroll taxes, the true marginal tax rate is:(.35 + .0765 +.0765)/(1+.0765) = 46.7. I wouldn't want to pay 46.7% or 50.3% as a marginal tax, but we need to be honest on this issue.