Social Security; A Change is Gonna Come

There is going to be a great deal of political pressure to change Social Security in the near future. The last time it was altered was in 1982. At some point the underlying trust fund that pays for a portion of Social Security Benefits will be exhausted and the only source of money to fund benefits will be actual tax proceeds. Something must be done. The list of proposals includes raising the retirement age, limiting benefits to those with a high net worth, and getting rid of the income cap.

First off life expectancies have not – I repeat, have not – increased, in fact they have fallen slightly over the last five years. The reason it appears that life expectancies have changed over the last half of the 20^th century was largely due to reduced child mortality and a reduction in deaths associated with military service. The median age of death for those over the age of fifty has not moved much at all over the last half century. So, increasing the retirement age simply deprives seniors of necessary income support when they need it most.

Second, to reduce the benefits to those over a certain income level was considered at SSI’s inception. It was rejected because we did not want Social Security to be a welfare program. If we reduce or eliminate payments to those above a certain income level the effect is minimal. Not a horrible idea but does not accomplish much.

What needs to be pointed out is the original idea for Social Security was that a retiree would rely on a three-legged stool.  Personal Savings, Social Security, and Private Pensions. Corporations have done away with Private Pensions, thank you very much. So if anything, Social Security Benefits need to be increased to make up for the loss of pension income.

The other proposal is to get rid of the income cap. Social Security taxes are amongst the most regressive of all taxes. A working person making 60,000 a year contributes 6.2% of their income to the Social Security Fund.  If they are self-employed, they contribute 12.4 percent of their earnings. A wealthy individual who makes $600,000 a year pays 1.5% of their income to Social Security. If they are self-employed, they contribute 3%. Get rid of the income cap and Social Security is solvent far into the 21^st century.

I would propose the following: Do not raise the retirement age, cap benefits above a certain income level, and get rid of the income cap and tax all income across the board. Cap the employer contribution at some point. Finally, increase benefits to make up for the universal loss of pension income.