As the reality of the Social Security systems impending failures under its current construct, there has been a growing agreement throughout the United States’ population and government regarding the need to reform the Social Security system. With the trust fund projected to be depleted in but a few decades from now, it is time the debate progresses beyond generalities and hypotheticals and examination of the implementation of specific proposals for reforming Social Security takes place. In Michael Tanner’s piece, 6.2 Percent Solution: A Plan for Reforming Social, Tanner delves into the viability of a reality of transforming the current outdated system to that of individual accounts that would give workers ownership of and control over their
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Some people would like to claim that the trust fund as a means to continue the payment of benefits, but this would only sustain benefits till 2042 according to sources quoted by Tanner. After this point the government is left with two options to perpetuate the existing system, either cut benefits by approximately 27% or continuously raise taxes. Tanner points that the option of increased taxes would lead to an increase in the payroll tax to as high as 18.9% by 2077. These options would have the elderly that are without additional savings or income suffer as costs of living in the United States show no sign of decreasing, or burden the working population with more climbing taxes robbing them of the ability to save for retirement to avoid the previous situation. Neither of these options, surviving on drastically reduced income for the term of retirement or climbing payroll taxes meet …show more content…
The transition from a defined-benefit system to a defined-contribution system draws this criticism naturally because there will almost certainly be a short-term requirement for additional revenues to balance the scales of incoming revenue and benefit payouts. This would at the end of the day be a decision for Congress, weighing the numerous financing mechanisms. Tanner addresses this critique to individual accounts methodically and simply with three sources: the portion of taxes on Social Security benefits currently used to fund Medicare that he claims should be redirected back to Social Security to provide estimated $8.3 billion annually; corporate welfare funds that were identified by the Cato Institute that could be redirected would provide more than $87 billion annually; the portion of returns “recaptured” through corporate taxes before returns are realized at the individual level would provide a substantial and growing source of revenue. Tanner suggests that residual transition cost could be financed through reductions in other government spending such as a 1% restraint of the projected growth in nondefense discretionary spending would generate more than $20 billion
Some people would like to claim that the trust fund as a means to continue the payment of benefits, but this would only sustain benefits till 2042 according to sources quoted by Tanner. After this point the government is left with two options to perpetuate the existing system, either cut benefits by approximately 27% or continuously raise taxes. Tanner points that the option of increased taxes would lead to an increase in the payroll tax to as high as 18.9% by 2077. These options would have the elderly that are without additional savings or income suffer as costs of living in the United States show no sign of decreasing, or burden the working population with more climbing taxes robbing them of the ability to save for retirement to avoid the previous situation. Neither of these options, surviving on drastically reduced income for the term of retirement or climbing payroll taxes meet …show more content…
The transition from a defined-benefit system to a defined-contribution system draws this criticism naturally because there will almost certainly be a short-term requirement for additional revenues to balance the scales of incoming revenue and benefit payouts. This would at the end of the day be a decision for Congress, weighing the numerous financing mechanisms. Tanner addresses this critique to individual accounts methodically and simply with three sources: the portion of taxes on Social Security benefits currently used to fund Medicare that he claims should be redirected back to Social Security to provide estimated $8.3 billion annually; corporate welfare funds that were identified by the Cato Institute that could be redirected would provide more than $87 billion annually; the portion of returns “recaptured” through corporate taxes before returns are realized at the individual level would provide a substantial and growing source of revenue. Tanner suggests that residual transition cost could be financed through reductions in other government spending such as a 1% restraint of the projected growth in nondefense discretionary spending would generate more than $20 billion