By Michael G. Williams and Bill Herrfeldt
THE ERICKSON TRIBUNE
Last month, the Tribune called attention to the major problems facing Social Security. We pointed out that a surge in the retirement population is jeopardizing the system, particularly at a time when the U.S. is experiencing a declining birthrate that’s reducing the number of taxpayers supporting Social Security.
By current government estimates, Social Security is facing a $13.6 trillion shortfall, which, if left unaddressed, could threaten the system that Franklin Roosevelt envisioned in the 1930s.
Essentially, the solutions fall into four categories: increasing taxes, reducing benefits, altering the ways Social Security funds can be invested, or a combination of these categories. Here, we will briefly outline some of the alternatives involved with each.
According to the Washington, D.C.-based think tank The Heritage Foundation, only 83% of wages are subject to Social Security payroll taxes, down from 90% when Congress last reviewed the system in 1983. One solution to the imminent deficit is to raise the Social Security wage base enough to bring it back to the 1983 level.
Increased payroll taxes
That would affect about 6% of wages not currently taxed; and if the base were increased slowly, the effect on taxpayers subject to that increase would be modest. Also, people earning a higher income would shoulder a larger share of the Social Security burden, thereby reducing the regressive nature of the system.
Another solution is to increase the rate of tax on covered wages. A permanent increase of 1.89% in the payroll tax would be sufficient to cover the gap for the next 75 years, according to the Social Security Trustees.
But this has been a very contentious political issue. Republicans are ideologically opposed to anything that appears to be a tax increase, while Democrats resist that notion out of fear of offending an already over-taxed electorate.