Social Security Solvency: Options for Adjusting FundingJul 27th, 2010 | By Sharon Shaw Elrod MSW EdD | Category: Social Security & Medicare
In the July 14, 2010, issue of Senior Citizen Journal (SCJ), we talked about the future of the Social Security Program, and why some of the current buzz about it is based on false information. Today we begin a series on recommendations made by the Special Committee on Aging, headed by Senator Herb Kohl, regarding the solvency of the Social Security program
The Committee begins its recommendations aimed first at adjusting current Social Security funding:
- Increase worker and employer contributions by 1.1%; estimates are that this change alone would eliminate the program deficit and create solvency for 75 years;
- Increase worker and employer contributions by 1% in 2022, and by an additional 1% in 2052; the 75-year shortfall is projected to be eliminated with this recommendation;
- Increase worker and employer contributions 1/20% annually for 20 years; this recommendation makes the change very gradual for both workers and employers, and has a significant effect in reducing the 75-year shortfall;
- Raise rates based on the trustees’ most current intermediate assumptions of the tax rate needed to balance revenues and outlays. In effect, this recommendation increases Social Security contribution rates to correct future estimates of insolvency.
- Enhance Collection of Existing Taxes. The tax gap is the amount of taxes that are legally owed, but not collected, by the federal government in a timely fashion or at all. The IRS estimates the total tax gap at about $345 billion a year, of which approximately $58 billion is in Social Security and Medicare payroll taxes (most of the $58 billion is from Social Security payroll taxes). Increasing the collection of unpaid Social Security payroll taxes could significantly reduce the funds needed to make Social Security solvent over the next 75 years.
Next in the series will be
- Broadening the revenue base for Social Security; including…
- Options to modify the Social Security tax cap;
- Eliminate the cap
- Gradually restore the cap to cover 90% of earnings
- Options to extend Social Security coverage to all workers;
- Options to use Progressive Taxes to cover Social Security’s legacy costs;
- Options to maintain reserves and diversify investments;
- Options to reduce benefits to improve program solvency;
- Options to raise the age for full retirement benefits;
- Options to lengthen career-earnings averaging period;
- Options to reduce benefits for new beneficiaries;
- Options to protect benefits for vulnerable groups;
The full text of the 2010 report is available for those readers who enjoy taking a look at the committee report, rather than read what’s being reported about it. Many seniors enjoy finding what actually comes… ‘from the horse’s mouth’ rather than a filtered report that may contain inaccurate statements.