Friday, May 21, 2010

Some Ways to Fix Social Security

Some of these will be quite painful but I kind of advocate this one as a fix.

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.

This is kind of a rob the rich thing but it would probably be the most politically palatable. I guess the cap was originally put in because rich people do not get any added benefit to Social Security so they shouldn't pay any extra into the system. I think I could stomach higher Social Security taxes as long as they do something like cut capital gains taxes or something similar.

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