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Saving Social Security Won't Be Painless May 20, 2010 Politicians have clamored for 20 years about fixing Social Security, but few members of Congress have the political mettle to make the program solvent. The Senate Committee on Aging released a report May 19 with recommendations to shore up Social Security funds before the program goes broke, which is estimated to happen around 2037 if Congress does nothing. The recommendations are a combination of new taxes, increased taxes, reduction in benefits and increasing the retirement age. Officials tried to spin the recommendations as small tweaks and painless adjustments. That's not the case. The committee suggested increasing payroll taxes for workers and employers by 1.1 percentage points. Currently, employees contribute 6.2 percent of their earnings to Social Security and employers match that amount. But while a 1.1 percentage point increase sounds meager, it will actually mean nearly 18 percent fewer dollars for workers. Currently, a person earning $50,000 a year shells out $3,100. His employer pays another $3,100. If the committee's recommendation is adopted the tax would increase $500 to $3,650 for both the employee and the employer. For employees earning $50,000 a year, that is $500 in new taxes. The tax increase might also cause employers to hire fewer employees or cut wages. Currently, Social Security tax is applied to the first $106,800 earned. The committee recommended ending the cap, but the higher payments would not mean higher benefits. The recommendations also propose a new 5 percent tax on couples earning more than $250,000 and on individuals earning more than $125,000. Many who receive Social Security benefits were angered this year when they did not receive a cost-of-living adjustment because there was no inflation in 2009. The committee's recommendation is to reduce cost-of-living adjustments by 1 percentage point each year. Additionally, the committee suggested gradually increasing the age for retirement from 67 to 70 for those who want to receive full benefits. And full benefits would take on a more meager meaning if the committee's recommendation to reduce benefits by 5 percentage points is adopted. If nothing else, the recommendations illustrate that fixing Social Security will involve difficult choices. The issue should be part of this year's Senate and House campaigns. Fixing Social Security will be painful, and everyone should brace himself because no one is likely to emerge unscathed. May 20, 2010 jconline http://www.jconline.com/article/20100520/OPINION01/5200309 |
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