How will the U.S. resolve its long-run budget crisis?  I’ve long predicted the abolition of the Social Security tax cap.  As I told my Public Choice undergrads back in 2011:

I think we’ve likely to eliminate the Social Security payroll tax phase-out for high-income voters.  The budgetary situation is gradually becoming more desperate, so before too long the government will have to choose between cutting expensive popular programs (SS, Medicare, defense) or higher taxes.  Even people who don’t benefit from these programs see them as socially desirable, so higher taxes are the path of least resistance.  Since voters are largely sociotropic, they probably wouldn’t be comfortable explicitly making “the rich” pay the full burden.  But it’s easy to frame the SS payroll tax phase-out as the elimination of a loophole rather than class warfare.  When you put it that way, even rich voters are likely to admit that this change is the least of available evils.

Only recently, though, did I take a look at what’s been happening to the cap over the last quarter century.  In nominal terms, it almost tripled between 1989 and 2014.  In real terms, it’s risen by over 25%.  Since I became a professor in 1997, the inflation-adjusted cap has grown over 20%.  Check it out:

Year

Nominal $ Cap

Real $ Cap

% Change

1989

48,000

48000

 

1990

51,300

48763

1.6

1991

53,400

48044

-1.5

1992

55,500

48668

1.3

1993

57,600

48916

0.5

1994

60,600

50196

2.6

1995

61,200

49310

-1.8

1996

62,700

49177

-0.3

1997

65,400

49780

1.2

1998

68,400

51258

3.0

1999

72,600

53511

4.4

2000

76,200

54667

2.2

2001

80,400

55605

1.7

2002

84,900

58054

4.4

2003

87,000

57984

-0.1

2004

87,900

57477

-0.9

2005

90,000

57153

-0.6

2006

94,200

57527

0.7

2007

97,500

58336

1.4

2008

102,000

58514

0.3

2009

106,800

61267

4.7

2010

106,800

59684

-2.6

2011

106,800

58735

-1.6

2012

110,100

58814

0.1

2013

113,700

59788

1.7

2014

117,000

60576

1.3

Claiming that events are already proving me right would nevertheless be foolish.  The real cap has barely risen since 2002.  What we’ve really seen is a massive increase from 1997-2002, with little change before or after.  This iron age of cap increases was bipartisan, spanning the late Clinton and early Bush years.

What should we conclude?  After a close look at the facts, I’m a little less confident in my long-run forecast.  If I’d been following the data closely in 2002, I would have expected rapid cap increases to continue.  Indeed, I probably would have given 1:2 odds that the cap would have been abolished by now.  As matters stand, I expect the cap to disappear around 2035.  As usual, I’m open to bets in the comments.