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Here are the results of an exercise to make Social Security last at least 75 more years. I used the Committee for a Responsible Federal Budget (CRFB) estimator.
✔️Increase the payroll tax rate by 2% shared by employers (1% each) or raise the 2% only on employers
✔️Eliminate the taxable wage cap, and also accrue additional benefits based on those taxed earnings using a 15% accrual rate. The same percentage as the lowest accrual or “bend point” uses now.
✔️ Apply SS taxes to the pre-tax health insurance premiums that workers with a cafeteria plan pay. This is consistent with 401k pre-tax contributions which are subject to FICA.
✔️ Cap future COLA adjustments for top 50% of SS beneficiaries. It would cap the size of the COLA so that high-income beneficiaries receive the same COLA dollars as the median beneficiary.
There are no changes to benefit accrual, or full retirement age or taxation of benefits.
One additional possible change would make the SS benefit taxable similar to a contributory pension. This option would only tax Social Security benefits in excess of worker payroll tax contributions, which are made post-tax. In practice this would mean no taxability on SS benefits for the first 5-6 years and then 100 taxable income. Which, of course, does not mean tax is actually due in all cases. This closes the funding gap by an additional 5%.
Another important change would put future changes to the tax rate on automatic so that the Social Security actuary would set the rate each year to assure the 75 year solvency goal is always achieved. No Congressional action required. Keeps politics out of it.
Should Congress make changes to the system, the tax rate would automatically be adjusted to cover the cost or account for savings.
This is similar to setting the Medicare Part B premium to maintain 25% beneficiary premium cost sharing of the growing costs.
I found https://www.fisherinvestments.com/en-us/insights/market-commentary/the-politics-and-practicalities-of-the-social-security-trust-fund useful on this topic.
There is nothing in this solution that provides Congress with the means to further control the populace or by which to “buy votes.” By definition, that means it has zero chance of ever becoming law.
I am not commenting on the quality, or lack thereof, of the solution, only on the political reality.
Had Congress desired to solve this problem, it would have done so. Therefore, the obvious fact is that they don’t have the desire to do so, and until it is forced upon them, which will occur in the very near future, they will not do so.
May I remind you of the timing of the 1983 “solution”?
For those wondering, here are the relative contributions of Dick’s choices.
I’m not sure why the Total below does not equal the sum of the percentages, but it is listed just as it appears on the CRFB site. I think it exceeds 100% to build the reserve needed to actuarially accrue the amount necessary to fund future benefits beyond the 75th year. Feel free to correct my misunderstanding(s).
Summary:
Congratulations! Under your plan Social Security will be sustainably solvent for the next 75 years and beyond.
Your Policy Selections/% of gap closed
Total: 148%
In 2050, your plan would reduce total scheduled benefits by 3% and increase payable benefits by 25%. Your plan would increase taxes by 43%.
Taxing labor more won’t work. If AI / automation takes all (or a sizable portion) of the jobs we will need to increase taxes on the corporations. Why? To paraphrase Willie Sutton “…because that’s where the money is.”