11:
SOCIAL SECTION SECURITY SOCIAL SECURITY SYSTEM
EMPLOYER PAYS 6.2% OF WAGES AND SALARY INTO SS FUND EMPLOYEE PAYS 6.2% OF WAGE AND SALARY EARNINGS TO SS FUND
TOTAL = 12.4% OF WAGES AND SALARIES UP TO MAX EARNINGS OF $90,000
IF SELF EMPLOYED, WORKER PAYS ENTIRE 12.4% OF PROFITS
CALLED THE PAYROLL TAX
SOCIAL SECURITY TAXES ARE NOT PAID ON INTEREST INCOME, DIVIDENDS, CAPITAL GAINS, ROYALTIES
NO DEDUCTIONS OR PERSONAL EXEMPTIONS
TAX TAKES SAME PROPORTION OF INCOME FROM ALL WORKERS
6.2% IF EMPLOYEE, 12.4% IF SELF EMPLOYED
THIS IS AN EXAMPLE OF A FLAT TAX
TAX RATE IS THE SAME FOR ALL WORKERS (AS LONG AS INCOME DOES NOT EXCEED $90,000)
SOCIAL SECURITY BENEFITS
RETIREES CAN BEGIN RECEIVING REDUCED BENEFITS AT AGE 62
OR
RETIREES CAN BEGIN RECEIVING FULL BENEFITS AT AGE 66 (AGE 67 IF BORN AFTER 1960)
CURRENT CONTRIBUTIONS INTO THE FUND ARE USED TO PAY BENEFITS TO CURRENT RETIREES
CURRENTLY THERE ARE ABOUT THREE WORKERS FOR EVERY RETIREE
CURRENTLY THERE ARE MORE CONTRIBUTIONS INTO THE FUND THAN BENEFITS BEING PAID OUT OF THE FUND
SOCIAL SECURITY SURPLUS
ALL THE SURPLUS SOCIAL SECURITY CONTRIBUTIONS HAVE BEEN SPENT BY THE FEDERAL GOVERNMENT TO PAY FOR OTHER GOVERNMENT EXPENSES
EARLY RETIREMENT BEGINS AT AGE 62
THE "BABY BOOMER" GENERATION BEGINS WITH PEOPLE BORN IN 1946 (AFTER WWII)
THE FIRST "BABY BOOMERS" WILL BE 62 IN 2008
AFTER 2008, THE NUMBER OF RETIREES WILL EXPAND RAPIDLY AND BENEFITS BEING PAID WILL INCREASE RAPIDLY
AROUND 2018, BENEFITS BEING PAID OUT OF THE SOCIAL SECURITYY FUND WILL BEGIN TO EXCEED CONTRIBUTIONS INTO THE FUND
THE ANNUAL SOCIAL SECURITY SURPLUS WILL DISAPPEAR
SUPPOSE ANNUAL SOCIAL SECURITY CONTRIBUTIONS AMOUNT TO 85% OF ANNUAL SOCIAL SECURITY BENEFITS TO BE PAID OUT
THE FEDERAL GOVERNMENT WILL NEED TO FIND NEW WAYS TO FINANCE THE ADDITIONAL 15% OF SOCIAL SECURITY BENEFITS
BASED ON CURRENT BIRTH RATES AND FUTURE RETIREMENT RATES, IT IS PROJECTED THAT THERE WILL BE ONLY TWO WORKERS FOR RETIREE
WITH EACH NO CHANGES TO THE SYSTEM, EVENTUALLY ANNUAL BENEFITS PAID TO RETIREES WILL GREATLY EXCEED CONTRIBUTIONS INTO THE FUND
SOCIAL SECURITY BENEFITS ARE INDEXED
BENEFITS PAID TO RETIREES INCREASE EACH YEAR BASED ON THE RATE OF INCREASE IN AVERAGE WAGES IN THE ECONOMY
POSSIBLE SOLUTIONS TO THE SOCIAL SECURITY PROBLEM
1. INCREASE THE AGE (62) AT WHICH WORKERS CAN BEGIN RECEIVING REDUCED BENEFITS
THIS WILL REDUCE ANNUAL BENEFITS AND IT WILL INCREASE THE LABOR FORCE SLIGHTLY
2. INCREASE THE AGE (67) AT WHICH WORKERS CAN BEGIN RECEIVING FULL BENEFITS
THIS WILL REDUCE ANNUAL BENEFITS AND IT WILL INCREASE THE LABOR FORCE SLIGHTLY
3. INCREASE THE TAX RATE
THE TOTAL TAX RATE (NOW 12.4%) HAS BEEN INCREASED MANY TIMES IN THE PAST
THIS IS AN EASY SOLUTION, BUT COULD BE POLITICAL SUICIDE
4. GREATLY INCREASE THE INCOME CAP (CURRENTLY $90,000)
THE CAP IS INDEXED TO INFLATION
THUS, IT INCREASES A LITTLE BIT EVERY YEAR
A MASSIVE INCREASE IN THE CAP (OR MAKING IT UNLIMITED) IS AN EASY SOLUTION
THIS IS EQUIVALENT TO A LARGE TAX INCREASE ON THE HIGHER INCOME CLASS
COULD BE POLITICAL SUICIDE
5. REDUCE THE GROWTH RATE OF ANNUAL BENEFITS
CURRENTLY BENEFITS INCREASE AT THE SAME RATE AS WAGES
PROPOSED SOLUTION IS TO LET BENEFITS GROW AT THE INFLATION RATE, NOT THE WAGE GROWTH RATE
THIS WILL ONLY PARTIALLY SOLVE THE PROBLEM
COULD BE POLITICAL SUICIDE
6. INSTEAD OF CONTRIBUTING ALL TAXES INTO THE SS FUND, LET WORKERS CONTRIBUTE A PORTION INTO THEIR OWN PERSONAL ACCOUNTS WHERE FUNDS WOULD BE INVESTED IN STOCKS AND BONDS
(SIMILAR TO A MANDATORY IRA)
IF THE ACCOUNTS GROW RAPIDLY, FUTURE BENEFITS MIGHT BE INCREASED
PROBLEMS WITH INDIVIDUAL ACCOUNTS:
WHO WILL SUPERVISE THE INDIVIDUAL ACCOUNTS COULD BE VERY EXPENSIVE
WHAT IF THE MARKET DECLINES HOW WILL THE GOVERNMENT INSURE A BASIC MINIMUM RETURN
7. INCREASE THE LABOR FORCE
ENCOURAGE (OR REQUIRE) WORKERS TO DELAY RETIREMENT
CHANGE IMMIGRATION POLICIES TO BRING MORE WORKERS INTO THE COUNTRY