WASHINGTON -- As Republican U.S. Sen. Rick Santorum traveled around Pennsylvania last week trying to convince voters that the Social Security system's financial problems must be addressed this year, he was repeatedly asked the same question: Why not solve at least part of the problem by lifting the income cap that lets America's wealthiest workers stop paying Social Security taxes on wages they earn above $90,000?

		Fixing Social Security This is part of an occasional series that takes a close look at the pros, cons and politics of individual proposals for Social Security and the extent to which each might contribute to resolving the system's long-term financial problems.

The popularity of raising or lifting the cap poses both an opportunity and a challenge for President Bush and Republicans like Santorum who would like to partially privatize Social Security by creating personal investment accounts for younger workers.

The opportunity: Agreeing to raise the cap might entice some Democrats into considering other changes to Social Security.

The challenge: Democrats might just latch onto the proposal as all that's needed to shore up the system.

The Social Security system draws on a 12.4 percent payroll tax to pay retirement and other benefits. Employees pay a 6.2 percent tax on their wages and their employers kick in another 6.2 percent.

But workers and employers pay Social Security taxes on only the first $90,000 of wages, which means someone earning $1 million a year pays the same in Social Security taxes as someone making $90,000. (The cap rises each year to keep up with wage inflation; last year, it was $87,900).

The fact that wealthier workers don't pay Social Security taxes above the $90,000 cap strikes many Americans as unfair.

National polls reflect this view. In an early February survey by Harvard University, the Kaiser Institute and The Washington Post, 81 percent of the respondents agreed that Americans should have to pay Social Security taxes on earnings over $90,000; only 18 percent said no.

	At a glance In 2003, analysts at the Social Security Administration studied the financial effects of two proposals for raising the $90,000 cap on wages and salaries subject to the Social Security payroll tax. The SSA estimates that the Social Security trust fund will be exhausted by 2042 and that the system will fall $3.7 trillion short of being able to pay currently promised benefits over 75 years. Under the first proposal, wealthier workers would have to pay Social Security taxes on all wages above $90,000, but their benefits would be larger when they retired to reflect the extra money they paid in. Actuaries estimate this would extend the trust fund until 2075. Under the second proposal, wealthier workers would have to pay Social Security taxes on all wages above $90,000, but their benefits would not be increased to reflect the additional money paid in taxes. Analysts estimate this would extend the trust fund beyond 2075, although its reserves still be would be declining. Opponents of raising the Social Security payroll tax cap say it could hurt the economy by discouraging business owners from hiring additional workers. Employees and employers split the cost of the 12.4 percent tax on wages. Graphic: Raising the cap on Social Security tax

But how much money would raising the $90,000 cap bring into the system? And how far it would go toward alleviating the system's estimated $3.7 trillion deficit over the next 75 years?

If the $90,000 cap were completely eliminated in 2005, it could bring in about $100 billion in one year, according to Social Security Administration spokesman Mark Lassiter. Agency actuaries have not looked farther into the future, Lassiter said, but if the change generated an average $100 billion each year, it could more than erase Social Security's deficit.

As the baby boom generation retires, there will be fewer people in the workforce to pay for their Social Security benefits. By 2018, the amount of money leaving the system will exceed the amount coming in. At that point, lawmakers must draw on the Social Security trust fund, which is currently being used to pay for other government programs.

Assuming the trust fund's obligations are fully covered by lawmakers, the fund would be tapped out by 2042, according to the nonpartisan Congressional Budget Office. After that, the money coming into the system from payroll taxes would pay for only 70 percent or so of currently promised benefits.

The answer to how much revenue the system would get by raising the $90,000 cap depends on how high it is lifted and whether there are changes in the complicated formula that determines how much workers get in Social Security payments when they retire. That formula is partially based on how much they pay into the system during their working years.

Levying Social Security taxes on up to $140,000 of workers' earnings -- which is supported by the retirement lobby AARP -- would bring in less money than raising the tax cap to $200,000, or eliminating it altogether.

In October 2003, Social Security actuaries analyzed two proposals for changing the cap, which at the time was $87,900.

Under one scenario, actuaries looked at eliminating the cap on taxable income altogether while guaranteeing that the benefits wealthier workers received when they retired reflected the extra money they had paid into the system. The analysts said that change would extend the life of the Social Security trust fund from 2042 to 2075.

Under the second scenario, the actuaries again considered eliminating the tax cap while not compensating wealthier workers in benefits for any money they contributed to the system over the $87,900 cap. With that change, the analysts said the trust fund would remain solvent beyond 2075 but that its reserves would be declining.

David C. John, a research fellow at the conservative Heritage Foundation in Washington, said the agency's analysis is misleading because all of the money that technically makes up the current Social Security trust fund is being spent on other government programs. He pointed out that when lawmakers are required to begin drawing on the trust fund in 2018, they will have to cut funding to other programs or raise taxes to replenish it.

Americans therefore should focus on when the Social Security system starts running deficits, in 2018, John argued, rather than when the trust fund runs out decades later. By his calculations -- which many Republicans, including Santorum, also use -- eliminating the payroll tax cap and asking wealthier workers to pay taxes on all of their wages would only delay the time when the system started running deficits by six years -- to 2024.

John assumes that when those wealthier workers retire, the Social Security system will pay them more to reflect the higher amount they paid in.

"You bring in revenue today so you look somewhat better in the short run, but the bad news is the out years still look pretty bad," John said. "Once these people start to retire ... you're not receiving new revenues, you're just continuing to receive the higher level of revenues, but, on the other hand, you now have a higher level of benefit payments."

Sen. Lindsey Graham, R-S.C., is one of the few people who has put a price tag on temporarily raising the $90,000 payroll tax cap, which he advocates. Under the legislation he plans to introduce as part of a comprehensive Social Security overhaul, American workers would pay Social Security taxes on up to $200,000 of their wages for a limited period of time. Graham spokesman Kevin Bishop said the change would bring in about $100 billion annually over a 10-year period, or roughly $1 trillion.

Graham has only put forward this proposal, however, to cover the transition costs of moving to a system that includes voluntary personal investment accounts for younger workers of the sort being championed by President Bush. The cost of allowing workers to divert some of their Social Security taxes into such accounts would be at least $1 trillion, according to most estimates, because those taxes no longer would be available to pay current benefits.

Graham's spokesman said he wasn't sure whether the $100 billion a year in projected revenue factored in the cost of the higher payments for wealthier workers once they retired. Either way, the Graham estimate seems far more generous than those of either the Social Security Administration or Congressional Budget Office.

The CBO also recently analyzed the amount of money that raising the $90,000 cap could bring in, and its estimate is lower. The CBO found that if workers paid Social Security taxes on up to $190,000 of their earnings, the change would generate about $581.1 billion over 10 years -- an average of $58 billion each year.

The proposal to raise the payroll tax cap is so popular, especially among Democrats, that Republicans might be able to use it to draw Democratic support for broader changes in Social Security. This assumes most Republicans could agree to raise the cap -- and that they then could persuade some Democrats to both raise the cap and support private accounts.

Bush, who has said all options are on the table with the exception of raising payroll taxes, surprised some conservatives earlier this month when he said he would consider raising the $90,000 cap. And he would face considerable opposition within his own party if he ultimately supports such a change.

Two of the most powerful Republican lawmakers -- House Majority Leader Tom DeLay of Texas and House Speaker J. Dennis Hastert of Illinois -- quickly said they would not even consider raising the tax cap because they would consider it a tax increase, even though the tax rate would not rise.

Conservatives argue that raising the cap could slow the economy and especially hurt small businesses, who might balk at hiring additional skilled workers. They also say the change would fall heavily on self-employed workers who pay the full 12.4 percent payroll tax themselves, as well as middle class families who make up to $200,000 a year.

But other Republicans attempting to broker a Social Security compromise, including Santorum and Graham, say options that Republicans might not traditionally support must be considered to bring Democrats into the negotiating process.

"This is a difficult decision. ... It will have an impact on our economy today," Santorum said last week in Johnstown when asked by a 16-year-old why workers making more than $90,000 shouldn't pay more.

"Any tax increase of that nature, it will have an impact on a lot of a lot of workers. I'm not saying I wouldn't vote for it. ... I guarantee you, if we're successful, that I may end up voting for things I don't like. But it's a matter trying to balance interests."