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The Best Way to Reform Social Security
Eliminating the payroll tax is the key. Yes, really.
The best way to reform Social Security is to eliminate the payroll tax. Seriously.
Social Security is going bankrupt, but official Washington can’t agree on how to fix it. Payroll tax receipts are insufficient to pay promised benefits. For decades, the trustees of the Social Security program have annually warned that the trust fund is out of balance and, absent reforms, will go broke.Current projections show the fund will be exhausted by the early 2030s (15 to 20 years from now). At that point, there will be only enough tax revenue coming in to fund about 75 percent of promised benefits. The options will be unpleasant. Either everyone’s monthly Social Security check will have to be reduced by 25 percent, or payroll receipts will have to be increased by 25 percent, or millions of retirees will have to be dropped from the rolls. Realistically, politicians will balk.
Acting sooner makes reform somewhat easier, but there are still only three ways to remedy this problem: a) cut benefits, b) increase receipts or c) both.
Cutting benefits is unpopular, so politicians never embrace benefit cuts, except to the extent they only affect future generations not yet old enough to vote. Increasing taxes is also bad politics, but a bit more politically acceptable, because there’s less pain per person: it’s spread over a larger population. There are about 59 million retirees, but 144 million workers. Read more…