In case you didn't notice, your taxes went up at the beginning of 2013--and you probably didn't notice. Nor did most of the country. And that's a good thing for Social Security.
My friend Dean Baker over at the Center for Economic and Policy Research slipped this quiet analysis out:
In January of 2013 nearly every worker in the country saw their payroll tax increase by 2.0
percentage points. The payroll tax holiday that had been put in place at the start of 2011 ended in December of 2012, leading to a jump in the Social Security tax from 10.4 percent to 12.4 percent of earnings up to the taxable limit.
This was an extraordinarily large increase in the payroll tax. Past increases had generally been phased in gradually. For example, from 1980 to 1990 the tax rate was increased by a total of 2.24 percentage points; however in no year did the rate rise by more than 0.72 percentage points, just over one-third of the 2013 increase. If the public was strongly opposed to any tax increases, it would be expected that one as large as the 2013 rise in the Social Security tax would lead to considerable anger, especially given the weakness of the labor market which was s till very much feeling the impact of the 2008-2009 recession at that point.
This is why it was striking to find that most people responding to a 2013 Google Consumer Survey apparently did not even know that their payroll taxes had been increased at the
start of the year. The poll asked respondents whether at the beginning of the year their Social Security taxes were raised, lowered, left the same, or don’t know. (See the appendix for a full description of the methodology.) A majority of respondents answered that they didn’t know what had happened to their payroll taxes at the start of the year. Only 28.9 percent correctly answered that their taxes had gone up.[emphasis added]
And this is important in this sense: while Social Security is solvent and can pay benefits many years down the road, at some point, there needs to be tax hikes to make up shortfalls to avoid benefit cuts, particularly if we increase Social Security benefits--which many of us believe should be done. I'm all for increasing the payroll taxes for the very wealthy but, based on the recent experience, people won't scream or even feel a slight increase in the payroll tax, particularly if it means HIGHER benefits.
As Dean says:
These poll results suggest that the public may not be especially adverse to modest increases in the payroll tax, since they may not even notice them. This supports the findings of other polls that indicate most Americans favor strengthening Social Security
through revenue increases such as raising the program’s tax rate. This would be especially likely if the tax increases occurred in the context of rising real wages. (The Social Security Trustees project that real average hourly compensation will rise by more than 60 percent over the next three decades.) If most workers see their wages rise in step with average compensation over the next three decades, then even an increase of 2-3 percentage points in the payroll tax would not prevent them from enjoying far higher standards of living at the end of this period than they do today.
Worth remembering: people don't mind taxes if they are for the right thing.