Tax hike alone won’t save Social Security, think tank warns

investmentnews.com:

A proposal to tax high-earning Americans more as a way to address the fiscal challenges with Social Security and Medicare funding overlooks its broader impact on households and the economy.

That’s according to the Tax Foundation, which warned about the potential far-reaching consequences of the Medicare and Social Security Fair Share Act proposed by Rhode Island Sen. Sheldon Whitehouse and Rep. Brendan Boyle from Pennsylvania.

“Lawmakers have two options to make Social Security and Medicare sustainable: raise revenue or reduce spending,” the Washington-based think tank explained in a new analysis. “[The proposal] tries to solve the problem only by raising taxes on people earning over $400,000.”

According to its analysis, the suggested tax hikes could raise more than $3 trillion over the next decade, but may also lead to adverse economic outcomes, including a decrease in long-run GDP by 1.2 percent and a potential loss of 759,000 full-time equivalent jobs.

While the bill prioritizes revenue collection from taxpayers earning more than $400,000 annually, the research foundation suggests it would have a long-run impact across the income spectrum, with households seeing their after-tax income go down by 2.1 percent on average.

“While the political rhetoric may focus on the tax hikes directly applied to the top 1 percent, most taxpayers would earn lower incomes in the long run,” the Tax Foundation said.

It noted that the proposals would mark a significant shift in the tax landscape by imposing one of the highest income tax rates on high earners within the Organisation for Economic Co-operation and Development.

“For example, the [net investment income tax] hike under the plan introduced by Sen. Whitehouse would put the combined