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Here are some proposals I’ve seen for fixing Social Security.
Remove the income cap on the payroll tax. Currently at $168.600, this would have people and their employer, as well as self-employed folks pay the tax on all of their income. It would not include any commensurate increase in their benefits. While I’ve never had the problem of earning over the income cap, it doesn’t seem entirely fare to me to put all of the load these people.
Work longer. Life expectancy when SS was signed into law was between 51 and 65years old depending on race and gender. So it might make sense that the normal retirement age (NRA) be increased. This proposal would have been okay for Dan the tax preparer, which was my occupation for the final 16 years of my career, because preparing taxes isn’t a very demanding job, at least physically. But it doesn’t seem reasonable to expect an iron or steelworker to last until age 70. I have never heard anyone propose a multi-tiered system that would require a higher tax rate for the brutal occupations, in return for keeping an earlier NRA for such jobs. I wonder if that would work.
Automatically adjusting payroll taxes every year based on actuarial calculations, thus removing politicians from the equation. This one makes a lot of sense to me, but I’m no longer working and paying taxes. Not sure how the worker bees would feel about this.
Investing some of the trust fund in equities. If it makes sense for me to have my own money in stocks, why wouldn’t it make sense to have some of the trust fund invested? Might help with the budget deficit as well.
How about individual accounts? This idea never appealed to me, as it seems like a chicken in every pot politics.
Is any one of these the answer? Are a combination of the above the answer? Is there a solution we haven’t thought of?
When we’re done here we can talk about Medicare.
Your first paragraph is a very bad idea, it turns the program into welfare. However, you can still help with solvency by eliminating the cap and also continuing accrual of benefits but at a new breakpoint and lower rate. Keep in mind that the really wealthy don’t earn a salary either.
You can realistically model many ideas and combinations here https://www.crfb.org/socialsecurityreformer/
it is important to keep true to the original intent of self-funding by all workers and not general revenue as FDR noted to keep as much as possible out of the hands of politicians. And in my opinion keep the funding from becoming more disproportionate by income.
The benefit formula already favors lower income workers.
Given all ages and retired or working have a state, is it fair to put the burden only on the current workers? I don’t think so and while we shouldn’t cut any earned benefits we could suspend or modify COLAs to help with solvency, nobody paid for them.
Do you really believe that removing the cap on taxable income for SS while not using the income taxed above the cap in computing benefits would turn the program into welfare?
The first problem I see with this position is your state of denial. Social Security already is a welfare program. Welfare is aid in the form of money those in need and any agency or program through which such aid is distributed. Social Security is, and always has been, nothing more than an income redistribution program. You have often made this point. The entire idea that one has paid for the benefits they receive is total nonsense. How many times have you pointed out the amazing short time period in which you received benefits that exceeded the total amount that you and your employer paid in?
SS is funded proportionally by all workers who all benefit proportionally. Once you have any group paying the taxes with no proportional benefit, it becomes a form of welfare in my book and changes the very foundation of the program. You can raise the cap even eliminate the cap and introduce a new bend point so that extra benefits accrue based on higher wages, but at a lower rate. Subject all wages to tax with accrual and you close 60% of the funding gap. Tax all wages above $400,000 with lower accrual and you solve 67% of funding gap. (Per SS reformer by CRFB)
Dick, I disagree with your first point. Per the Social Security Administration’s website. The earnings of those above the tax cap have grown faster than those of the rest of earners (demonstrating that income inequality is real).
As a result the percentage of earnings covered by the the tax has decreased since the early eighties.
The tax was last increased to 6.2% in 1990, so as of next year 35 years ago. It’s seems reasonable to increase it to 7%.
As has been written for years the longer Congress waits to address the Social Security funding issues the more drastic the solutions become.
We know however that taking action is unlikely because Profiles in Courage in today’s politicians is sorely missing.
That link looks interesting. I will spend some time playing with that.
Regarding suspending COLA, and in my best Mr. T voice: I feel sorry for the sucker that proposed that!