> Or increase taxes? Social security taxation is limited to the first ~$120K of someone's income. Why?
The theory, I believe, is that this is tied to the maximum amount of income that is counted in the benefits formula for SS. OTOH, there's no reason you couldn't count more income toward benefits (there's already at least one bend point where the amount of benefits for each additional dollar of lifetime qualifying income/contributions is reduced, so if you are concerned with the distribution of benefits if more income is counted, you could also add additional bend points.)
If you wanted to go further, you could include personal capital income (perhaps with some limit, or perhaps open ended, with additional bend points, as necessary, as discussed above for increasing/removing the limit on labor income) as SS taxable (and in SS benefit calculations). Given that at least some capital returns are a result of active personal management that can become less practical with age or disability for the same reason that labor can, it makes as much sense to preserve a safety-net retirement for those retiring from such active management as for those retiring from wage labor.
The theory, I believe, is that this is tied to the maximum amount of income that is counted in the benefits formula for SS. OTOH, there's no reason you couldn't count more income toward benefits (there's already at least one bend point where the amount of benefits for each additional dollar of lifetime qualifying income/contributions is reduced, so if you are concerned with the distribution of benefits if more income is counted, you could also add additional bend points.)
If you wanted to go further, you could include personal capital income (perhaps with some limit, or perhaps open ended, with additional bend points, as necessary, as discussed above for increasing/removing the limit on labor income) as SS taxable (and in SS benefit calculations). Given that at least some capital returns are a result of active personal management that can become less practical with age or disability for the same reason that labor can, it makes as much sense to preserve a safety-net retirement for those retiring from such active management as for those retiring from wage labor.