Fixing Social Security
A lot of people are saying that the Social Security system is running out of money. Some talk show hosts have asked callers to say how they would "fix" the Social Security system.
In reality, the Social Security system is not running out of money. It has enough to run unchanged until about the year 2045.
This is what should be done.
I. Over the past several decades the amount of Social Security tax collected has been more than what was needed to pay Social Security benefits. The surplus has been placed in a trust fund, as described by government brochures.,
No changes should be put in effect until a substantial amount, say a third, of the trust fund has been used up to pay Social Security benefits with. This is expected to happen somewhere around the year 2025.
II. Over the years, much of the trust fund money has been used for general federal expenses. "Invested in government bonds" is the description given in brochures. If this money is not returned to pay Social Security benefits that that is the same way as saying that earned income was taxed at a higher rate than unearned income.
This is bad. Earned income should really be taxed at a lower rate than unearned income. One method is to put a surtax on unearned income (dividends, interest, capital gains, etc.). An exemption can be granted to low income taxpayers.
III. Because so much labor that used to be performed in the U.S. is now performed in other countries, less Social Security tax has been collected.
To counteract this, an import tax may be levied based on the estimated labor that went into imported goods. This would be used to help pay Social Security benefits.
IV. People who have lived frugally and saved for their retirement are upset that means testing for Social Security would cut their benefits more compared with people who spent more and saved less during their earlier years.
To fix this, any means testing should be recomputed each year based on income only (including dividends, etc.) and not on the value of owned property and money.
V. The system should not discriminate against retirees based on age.
If at any time benefits are cut, existing retirees should be affected as well. An extra benefit may be defined for retirees with unusually low overall incomes.
VI. Some folks are saying right away that Social Security taxes need to be increased. Some folks are saying that, because Social Security is running a surplus, Social Security taxes should be reduced. I say that we should compromise, leave Social Security taxes unchanged.
However, no decreases in Social Security benefits, no retirement age increases, and no increases in Social Security taxes should be put into effect while Social Security is running an annual surplus.
Last updated 5/14/11
Go to other, unrelated, topics
All parts (c) copyright 2011, Allan W. Jayne, Jr. unless otherwise noted or other origin stated.
If you would like to contribute an idea for our web pages, please send us an e-mail. Sorry, but due to the volume of e-mail we cannot reply personally to all inquiries.