Senators Have Financial Incentives To Favor Bad Policies For Seniors

August 30, 2011 11:55 am ET — Jamison Foser

ThinkProgress catches Sen. Chuck Grassley (R-IA) falsely claiming at a town hall meeting that lifting the payroll tax cap on Social Security would only extend the program's solvency by five years. In fact, as ThinkProgress notes, lifting the cap on income subject to payroll taxes would keep Social Security solvent for 75 years. In contrast to his factually incorrect skepticism about lifting the payroll tax cap, Grassley has long been open to raising the retirement age, like many of his Senate colleagues.

The widespread preference among lawmakers for raising the retirement age (which would hit middle class and lower income workers the hardest, particularly those who work physically demanding jobs) rather than lifting the payroll tax cap (which would affect only the relatively small number of the Americans who earn more than the cutoff, currently $106,800 per year) may seem odd. Why prefer a solution that takes money from those who can least afford it and forces elderly workers in physically demanding jobs to work longer over one that simply raises taxes a little bit on people who can most afford to pay them?

It is useful to remember that members of the United States Senate often work well into their 70s and beyond, with benefit of a job that allows them to reduce their hours and workload when necessary. (Members of Congress tend to work longer hours with fewer days off than the public and media give them credit for, but, crucially, they are not required to do so.) Grassley, for example, is currently 77 years old. Raising the retirement age would not affect him. Nor would it affect most of his colleagues. And it would have relatively little effect on many of the people they encounter on a daily basis — lawyers, lobbyists, donors, journalists, writers, think-tankers, etc.

Lifting the payroll tax, on the other hand — that would affect senators, every one of them. Rank-and-file members of the Senate currently make $174,000 a year, and pay no payroll taxes on the last $67,200 of that salary, since the payroll tax only applies to the first $106,800. If senators had to pay the 6.2 percent Social Security payroll tax on their full salary, they'd pay about $4,000 more each year. And, again, many of the people they encounter each day — lawyers, lobbyists, donors, etc — would see their tax bill increase if the payroll tax was lifted.

In short, the solution that would be best for the vast majority of their constituents would cost senators and those close to them some money, while the solution that would hit their constituents the hardest would have little, if any, effect on them. Think it's just a coincidence that policymakers tend to prefer raising the retirement age?