Several recent surveys indicate that most millennials in America think they will be millionaires in their lifetimes and will be wealthier than their parents.
Reality — according to the OECD — suggests otherwise. Globally, the middle class is shrinking, and younger workers have less wealth than their predecessors. The same is true in the United States, where it’s not even clear whether Social Security will be solvent when millennials are ready to collect. U.S. Rep. John Larson, D-Conn., thinks he has a solution: raising payroll taxes.
Larson’s Social Security 2100 Act would dramatically reshape Social Security. It would increase the minimum Social Security benefit amount to at least 25 percent above the poverty line and increase the amount of benefits that are tax-free. Today, Social Security benefits are not taxed unless an individual recipient has over $25,000 in non-Social Security income ($32,000 for a couple). Larson’s act would double the individual threshold and roughly triple the threshold for married couples. He plans to fund this by broadening the payroll tax base to include wages above $400,000 and by increasing payroll taxes from 12.4 percent to 14.8 percent by 2043. Sole proprietors would absorb the full increase while employers and their workers would split the amount equally.
More than 200 Democratic lawmakers support the bill, but is it realistic? The National Taxpayers Union isn't so sure, at least not where millennials are concerned. Millennials work differently than previous generations: They are more likely to have side gigs and pursue entrepreneurship. But that could come at a cost under the proposal. Some fear that employers will cut wages in response to increased payroll taxes and that sole proprietors will incur thousands of dollars in extra taxes. Mattie Duppler of the National Taxpayers Union expressed these and other concerns in testimony before the House Ways and Means Committee.
But consider Norway. Taxes are high in Norway, but millennials there have more disposable household income than previous generations. According to the BBC, unlike their counterparts across Europe and in the United States, young Norwegian workers are getting richer.
What makes Norway so different? There are many factors at play, including robust economic growth from oil and gas deposits, the world’s largest sovereign wealth fund, highly subsidized healthcare, low-cost child care, tuition-free public universities, and a strong trade union presence that has driven up Norway’s minimum wage. Taken together, this means that Norwegian workers have fewer demands on their already-high wages and a solid retirement safety net.
Sure, it’s easier to provide robust social support in a country like Norway, which has roughly 5.25 million people and is smaller than nine of the top 10 U.S. metro areas. But the Norwegian example demonstrates the importance of a multifaceted approach to these issues — one that may reduce the sting of higher tax burdens.
There is some hope in the United States. Several Democratic presidential candidates have floated some type of tuition-free college plan, including former Vice President Joe Biden, who proposes cutting the step-up in basis to pay for his plan. Another measure – the Child Care for Working Families Act of 2019 — would cut or eliminate child care costs for low- and middle-income families.