The federal government is considering a variety of ways to tweak Social Security benefits for people younger than age 55 in 2010. The Congressional Budget Office recently analyzed the financial impact of 30 potential Social Security changes including tax increases, benefit cuts, and raising the retirement age.
A Gallup and USA Today poll of 1,020 adults released this week asked Americans their feelings about six of these potential Social Security fixes. The Social Security change with the most support (67 percent in favor) is requiring high income workers to pay Social Security taxes on all of their wages. Most adults (63 percent) also say it is a good idea to limit benefits for wealthy retirees.
Workers pay into the Social Security system on earnings up to $106,800 in 2010. If wealthy retirees were taxed on all of their income above $106,800 annually, but did not earn extra benefits based on those contributions, the Social Security trust fund’s projected deficit would be completely eliminated, according to a U.S. Senate Special Committee on Aging report released in May. If the additional taxes count toward benefits, 95 percent of Social Security’s future shortfall would be corrected. However, wealthy workers would face significant tax increases if this proposal were implemented. An individual making $400,000 per year, for example, would pay $18,178 more per year and his or her employer would pay a matching amount, according to Committee on Aging calculations.
Americans are generally opposed to most of the other changes that Gallup inquired about. Just over half (53 percent) of adults think further reducing benefits for early retirees is a bad idea. And 57 percent of the survey respondents say they disagree with cutting Social Security payouts for all Americans under age 55. Clear majorities of workers are also opposed to increasing the age retirees can receive their full benefits (63 percent) and against increasing Social Security taxes for all workers (64 percent).
Most of these fixes would not reduce Social Security’s future funding shortfall unless implemented in combination. For example, a 5 percent cut in Social Security payouts for new beneficiaries beginning in 2010 would reduce the deficit by 30 percent. Increasing the age future workers are eligible for full Social Security benefits from 67 to 70 also eliminates less than a third of the deficit, according to the Senate report.
Increasing Social Security taxes on all workers, however, would make the Social Security system sustainable for the foreseeable future. If the amount workers and employers each pay into the system was increased by 1.1 percent from 6.2 percent to 7.3 percent the deficit would be eliminated and the program would remain solvent for at least 75 years. For a worker making $43,451 in 2010 the tax increase would be $478 a year.
Tell us, should taxes be raised for the wealthy to sure up Social Security?