…than they are with payroll tax increases. That’s the conclusion of a new National Center for Policy Analysis study:
Retaining the current benefit structure will require an immediate and permanent increase in the Social Security payroll tax of 3.3 percentage points. In contrast, a long-run balanced budget for Social Security could also be achieved by retaining the current tax rate, but making the following two benefit reforms.
- Gradually raising the retirement age for workers who become eligible for benefits in 2023 and after.
- Making the benefit formula less generous for higher earning workers through progressive price indexing.
What difference do these changes make?
- With the baseline program, average-earning men born in 1985 will have to pay 13.5 percent of their lifetime income in taxes and receive benefits equal to 9.6 percent of their income.
- However, the same workers in the reformed program would pay a lower tax rate of 10.2 percent to receive reformed benefits of 8.2 percent.