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Think tank offers 2 options to preserve Social Security

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With Congress once again considering changes to the Social Security program, the National Center for Policy Analysis has suggested two different approaches to shore up the system.

In an analysis titled “How Social Security Reform Could Benefit Workers,” the nonpartisan, nonprofit think tank proposes a “baseline” program that retains the current level of benefits but increases payroll taxes by “an immediate and permanent … 3.3 percent.” 

Under that scenario, according to the analysis, “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, resulting in a lifetime net tax of 3.8 percent (13.5 – 9.6).”

The “baseline” program with its payroll tax increase also preserves the progressivity of Social Security for low-wage earners: “a very low-earning man born in 1985 will pay taxes equal to 13.5 percent of his lifetime income and receive benefits equal to 15.8 percent of income, resulting in positive net lifetime benefits equal to 2.4 percent of his lifetime earnings.”

Alternatively, NCPA proposes a “reformed” Social Security program that would make two changes: “gradually raising the retirement age for workers who become eligible for benefits in 2023 and after, and making the benefit formula less generous for higher earning workers through progressive price indexing.”

According to NCPA, “Both political parties have proposed reforms with these attributes.” The law has been amended many times since Congress passed the Social Security Act in 1935. 

Under the “reformed” program, the average-earning man would pay 10.2 percent instead of 13.5 percent, and would receive “reformed benefits of 8.2 percent” instead of 9.6 percent. As a result, says the analysis, he would pay a lower net lifetime tax of 2 percent.

The low earner in the “reformed” program would also pay 10.2 percent instead of 13.5 percent, but would receive “reformed” benefits of 14.5 percent instead of 15.8 percent, with net lifetime benefits totaling 4.3 percent of his lifetime earnings.

NCPA advocates the “reformed” program, although one reason it gives — that it “can be complemented with voluntary, individually directed personal retirement accounts” — presents its own difficulties, given the challenge many Americans face in saving enough for retirement.


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