Social Security. The Social Security program faces a long term financing shortfall. The trust fund’s reserves are currently projected to cover payments until the end of 2037.
Increase worker and employer contributions. Workers and their employers currently pay 6.2 percent of earnings up to $106,800 into the Social Security system, or a maximum of $6,622 each per year. Self-employed workers are required to pay 12.4 percent of pay up to the same cap. If the contribution rate were increased by 1.1 percent to 7.3 percent of earnings, Social Security’s projected deficit would be eliminated. Using this fix, a worker making $43,451 in 2010 would face a tax increase of $478 a year, or $9.19 a week, and the employer would face an identical increase.
Boost future contributions. Taxes don’t need to be increased immediately because there is currently enough money in the Social Security trust fund to pay out scheduled benefits. For example, the Social Security tax bite could be increased from 6.2 percent to 7.2 percent for workers and employers in 2022, and to 8.2 percent in 2052, which would also completely eliminate the shortfall. Alternatively, taxes could be gradually ramped up by 1/20 percent annually for 20 years, which would decrease the Social Security deficit by about 69 percent.
Modify the Social Security tax cap. Workers pay into the Social Security system on earnings up to $106,800 in 2010. About 83 percent of worker earnings were subject to Social Security payroll taxes in 2008. If all earned income above $106,800 annually were subject to Social Security contributions but did not count toward benefits, Social Security’s projected deficit would be completely eliminated. If the higher income counted toward Social Security benefits, about 95 percent of the shortfall would be absolved. Other ideas: apply a new Social Security formula to earnings above the current cap or raise the amount of the income cap to apply to 90 percent of all worker earnings.
No comments:
Post a Comment