Off the top of my head, I think there are a couple of ways to handle this.
First, remove the wage cap of Social Security. Right now, I believe Obama wants to swap a cap for a floor. Pay for no Social Security tax for people making under $250,000 a year, and tax those above it. It may be better as a matter of perceived fairness and shared sacrifice if all wage earners payed the tax.
Second, to mitigate this increase the benefits for retirees, but also continue to tax Social Security income, and then raise the threshold of taxation to a higher level, say an income of $250,000, where the benefit is therefore reduced if not eliminated.
This may be too much smoke and mirrors. I can imagine the people making right around $250,000 a year would do everything they could to make sure they made less than that. Companies would offer more compensation in nontaxable ways.
That's because he wants to say that nobody making under $250,000 pays higher taxes under his plan, since $100,000-$250,000 is too lucrative a source of $2,300 cheques.
And which also lets him wriggle out on saying raise the cap, which implies raising the benefits to people retiring on average incomes above $100,000.
If there is a floating levy, it could certainly kick in two stages, with income above $250,000 taxed first, until the levy reaches the Social Security tax rate, then income between $100,000 and $250,000 kicking in.
I agree with Herman Daly on the unsustainability of 500x ranges of income, and so no reason at all that Social Security income entitlements should be accumulated on income in excess of twice the median income. If people receiving above that income level gamble it in the stock market and lose it, tough titties. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
