Here are the projected increases in social security security taxes needed to fund current benefits

[dkf]

"Under the Increased Payroll Tax scenario, payroll-tax rates are assumed to be increased as needed beginning in the year of trust-fund exhaustion so that present-law scheduled benefits would always be payable in each year. The payroll-tax rate would begin to increase from the present law amount of 12.4 percent beginning in 2042. The payroll-tax rate increases to 17.01 percent in 2043 and continues to increase year-by-year until reaching 18.32 percent in 2078. It is expected that, under this scenario, further increases in the payroll tax rate would be needed after 2078 due to continuing increases in life expectancy."

http://www.ssa.gov/OACT/NOTES/ran5/an2004-5.html

I guess this assumes the general treasury would need to have fully paid the several trillion it owes the social security system, probably necessitating higher general fund taxes, then the payroll tax itself would go up.

[Warren Stupidity]

1. Open the borders and beg our southern cousins to come live here.

[Recursion]

2. We could borrow to redeem the trust fund bonds

It would be a bigger deficit those years, but it wouldn't add to the overall debt. Those bonds will be more expensive to the government than the SS bonds are, though, in all likelihood.

[rgbecker]

3. I'm looking forward to crawling into bed tonight with that report for a closer read.

At one time Obama was suggesting they raise the maximum salary that would be paying in to above the present $106,800. If that cap were removed, the social security system would be solvent at present rates for a couple of generations. Not much about that lately...what's up with that?

[JPZenger]

4. Obvious Alternative

If we make a modest increase in the total income that is subject to social security taxes, then the whole problem is solved. Someone who makes a high income now pays a fraction of the percentage of their income for social security taxes that a lower income person pays.

[Statistical]

5. That sounds bad but isn't when you break it down.

18% increase on 6.4% contribution rate = 7.6%.

Essentially doing nothing else but raising SS contribution rate from 6.4% to 7.6% would produce the required revenue.
Of course that would be the most regressive option. Better option would be to simply raise the cap. Still worse case scenario a payroll tax increase of 1.2% would cover the revenue needed at the peak. If you spread it out (like raising rate earlier says 2020) it might be closer to 0.5% to 1% increase.

[dkf]

8. Isn't 12.4% increased to 17.01% a 37% increase in one year from 2042 to 2043.

So that is an increase in SS taxes for the employee and the employer making the cost to employ a person more expensive.

But the question to me is if people in 2042 will accept a 37% increase in payroll taxes or if they will cut benefits.

[Statistical]

9. Oops yeah you are right. I misread the sentence. Please disregard my entire analysis.

We need to raise the cap. It isn't a matter of wanting to raise the cap we MUST raise the cap.

17% SS contribution would be 8.5% on employee side (and almost guarantee no pay raise due to employer increase). That is over 2% (essentially a reverse payroll tax holiday).

I doubt most workers will support that.

Maybe 1% increase + raise the cap + modify the return on the ultra high end of SS earners + make SS benefits fully taxable for those with retirement income > $250K. It likely will require a combination of things. It can be done the question is will it be done.

The sooner we start the less the pain.

It is like having a CC bill with $1200 balance interest free for a year. If you don't pay it in 12 months it retroactively hits you with back interest. Start 12 months out you need to pay $100 a month. Start 6 months out you need to pay $200. Start 4 months out; $300. Wait until 2 months out it is $600. Wait till the last month it is $1200. The longer we wait the more the pain because the changes are over a shorter period of time.

[neverforget]

6. I know what'll fix that problem-A TAX CUT!!!!

:sarcasm:

[Selatius]

7. Just eliminate the cap on the FICA tax. Currently, it hovers around 115K or thereabouts.

Eliminate it, or simply bump it up to 200,000. Problem solved, and we didn't have to raise a regressive payroll tax to do it.

[damntexdem]

10. If the U.S. bonds are no good, then SS will be the least of our economic threats.

But all that is needed to fully fund SS is to raise, or eliminate, the damn income cap on FICA taxes.

[Juche]

11. If you increase it to about 14-15% now you can fund SS until the 22nd century

That is w/o lifting the cap, raising the age or lowering benefits. If you wait until 2042 then the rate needs to be at 17-18%.

But lifting the cap is what nees to be looked at first.

[Statistical]

12. I agree with this.

Possibly also look at raising the cap combined with small increase in SS contribution rate.

Currently:
6.4%/6.4% =12.8% total
Capped on 115K.
Benefits capped on 115K contribution (sliding scale)


Modified*:
7.0%/7.0% =14% total
Capped on 500K.
Benefits capped on 500K contribution (even more progressive sliding scale)

* Note the changes listed are just illustrative. They aren't exact values. Someone in SSA would need to run numbers to determine what combination of rate increase and contribution cap would provide necessary funding.

[dkf]

13. Yet do we need to keep the IRR positive for everyone so that at least you get your money back?

Or does this turn into a true tax for those at the upper end? And if that is so, what are the political consequences?

There are numerous tables in this report and the high income bracket translates to average earnings of $69,000.

[Statistical]

16. You don't need a positive IRR. Currently at the high end IRR is very close 0

and sometimes negative.

However IMHO( just my opinion) raising cap and saying your benefit rises by $0.00 above current cap will kill Social Security. It will be a "game changer" turning the system from an earned benefit to welfare.

That is why most of proposals made internally by SSA have benefit rising w/ contribution cap. Now this is actually a good thing because SSA benefits are on a sliding scale. So while in nominal terms benefit amount rises the IRR actually falls. In essence if cap goes from say $115K to $500K someone making $500K may see their benefit rise but they will see their contribution rise by much more.

[RC]

14. Why is Social Security in trouble in the first place?

Why is there a problem in the first place? Because of all the job losses caused by shipping living-wage jobs overseas.
We need to get those living wage jobs back. Notice I said Living Wage Jobs, not just jobs.
Why is no one saying anything about this?

[JVS]

15. Take them out of the tax cut.