Romney's Social Security plan: Benefit cuts and a tax hike for middle class

Romney's gunning for your Social Security Mitt Romney likes to say he has a plan for Social Security, and President Obama does not. He definitely has a plan, Bloomberg's Deborah Solomon explains, one that typically favors the wealthy at the expense of the middle class.

With Romney's insistence that he won't raise taxes, lifting the cap on payroll taxes to income over $110,000 (the current ceiling) is out of the picture. So his plan, based on one proposed by former Utah Sen. Bob Bennett in 2006, rests solely on benefit cuts: raising the retirement age and a price indexing scheme that on the surface looks progressive, but ends up benefitting top earners. The percentage of income that wealthy people would have to save to offset the benefit cut is miniscule compared to what a middle-income earner would have to save. Solomon explains how this is ultimately a kind of tax hike on middle-income workers, using an analysis done by Social Security actuaries of the Bennet plan Romney is copying:

For an average earner, saving 1 percent of wages a year, investing it in Treasuries and cashing it in for an annuity would offset a 10.3 percent benefit cut. That means a $45,000 earner would have to save 2.3 percent of income, or $1,000 a year, to offset the 24 percent cut. [...]

Meanwhile, someone earning $110,000 would have to save 2.1 percent of pay to offset a 35 percent benefit cut [and] a $1 million earner, who pays Social Security taxes on only $1 of every $9 earned, would have to save just 0.23 percent of income to offset benefit cuts.

That's an "implicit tax hike" on middle-income workers, who have to save much more out of every paycheck in order to secure their standard of living in retirement. It's yet another middle-class squeeze. And with Romney and Ryan, that's a best case scenario, because both have championed privatization schemes for the program that would certainly doom it.

Every candidate on our Orange to Blue endorsement list has pledged to protect Social Security and Medicare, explicitly saying that they will oppose both raising the retirement age and eliminating or reducing the cost of living adjustment as Romney is proposing.

Help send these people to the House to protect Social Security.