Would raising taxes cure Social Security’s ills?
An easily quantifiable way to solve Social Security’s shortfall would be to increase to the 6.2% tax rate that employers and employees each pay on the first $132,900 in income in 2019. Matthew Frankel explores how much of a tax increase it would take to resolve keep the program solvent for 75 years. The Trustees estimate an immediate 1.35% increase in the payroll tax is needed (for each side), or 7.55% each for employees and employers. That assumes that the increase would be implemented immediately, rather than phased in over a period of years as other proposals suggest. It also assumes we are starting with $2.9 trillion in reserves, currently the case. To wait until the reserves run out before fixing the problem, requires a payroll tax increase of more than 4%, or 2% each for employees and employers, a big difference. As Frankel notes, this illustrates the need to act sooner rather than later to fix the problem. Some other potential fixes to the problem include these:
- Increase or eliminate the maximum taxable wage cap. (i.e. make more of high earners’ income subject to Social Security taxes).
- Raise the full Social Security retirement age, currently set at 67 for those born in 1960 or later.
- Reduce benefits for high-income retirees.
- Change the way cost-of-living adjustments are calculated to an index that rises more slowly.
Ultimately, any reform plan is likely to have more than one element from above. Read full piece here here.
The Association of Mature American Citizens (AMAC) believes Social Security must be preserved and modernized. This can be achieved by making modest changes in cost of living adjustments and the retirement age, with no additional taxes on workers. AMAC advocates for a bipartisan compromise, “The Social Security Guarantee Act,” taking selected portions of bills introduced by former Rep. Johnson (R-TX) and Rep. Larson (D-CT) and merging them with the Association’s own well researched ideas. One component is Social Security PLUS, a new yet voluntary early retirement plan that would allow all earners to have more income available at retirement. This component is intended to appeal especially to younger workers. AMAC is resolute in its mission that Social Security be preserved and modernized and has gotten the attention of lawmakers in DC, meeting with a great many congressional offices and their legislative staffs over the past several years. Read AMAC’s plan here.