Social security is in a crisis even worse than Medicare. Because Congress has consistently spent contributions, social security is always on the edge of insolvency and now that the Baby Boomers have begun retiring, the crisis is going to get worse, with not enough workers to fund the retirees.
Ideas such as raising the retirement age are floated by University of Michigen economists have a more positive approach; they say if we stop collecting social security payroll taxes when workers are 55-years old, their take-home pay would jump by 10.6 percent, older people would work 1.5 years longer on average and end up still paying more in income taxes and helping to reduce the Federal deficit while not drawing retirement.
Basically, they say that if every U.S. worker got that automatic 10 percent pay raise at age 55, due to no longer paying into social security, most people would work quite a bit longer to enjoy the extra income before they retired. A large net gain.
"People are living longer, healthier lives, and so far have opted to take most of that extra time as additional retirement rather than work," says economist John Laitner, who conducted the analysis with Dan Silverman."We are proposing a way of responding to this situation through targeted tax-rate changes that would reward older workers for staying on the job and also benefit the economy as a whole."
Using data from the University of Michigan Institute for Social Research (ISR) Health and Retirement Study and from the Consumer Expenditure Survey conducted by the U.S. Bureau of Labor Statistics, Laitner and Silverman analzyed how tax cuts targeted at older workers would affect the likelihood of working longer and the size of the federal deficit.
"Our idea is to lower the taxes on an individual precisely at the time of life when people are making decisions about whether to work longer or retire," Silverman said.
Workers would need to pay about one percent higher payroll taxes a year until age 55 in order for the Social Security system to break even, the researchers show. This would mean that over their lifetimes, households would pay about $15,000 more in Federal income tax, providing welcome reductions in the Federal deficit.
And workers age 55 and over would see their after-tax earnings increase by a healthy 10.6 percent – inducing them to work longer and enjoy the extra income. Work years beyond age 54 would not affect benefits, and as in the current system, workers could claim benefits as early as age 62 although waiting until full retirement age would continue to be rewarded with higher benefit levels.
"Not everyone would benefit," Laitner said. "Households with a strong preference for very early retirement would pay the slightly higher payroll tax before age 55, but leave the labor force before gaining much from the elimination of the payroll tax after that. Late retirees would, by the same token, be big winners. And the point of the reform, after all, is to encourage work by rewarding it."
Their analysis appears in The Journal of Public Economics.
- PHYSICAL SCIENCES
- EARTH SCIENCES
- LIFE SCIENCES
- SOCIAL SCIENCES
Subscribe to the newsletter
Stay in touch with the scientific world!
Know Science And Want To Write?
- Sexual Fantasies: Threesomes Are Normal, Golden Showers Not So Much
- Ghost Light From Dead Galaxies - A Hubble Halloween
- Mediterranean Diet Linked To Better Kidney Health
- Greenpeace Says Its GMOs Are Better Than Science's GMOs, Still Hates Golden Rice
- US Wildlife Bans On GMOs And Neonics Lack Transparency And Scientific Rationale
- Coulrophobia: Are Clowns Scary? Ha Ha Aaaargh
- Homo Floresiensis: Hobbit Species Continues To Provoke Questions About Human Evolution
- "Twelve years in a major urban public school system, and I couldn't once bring myself to eat a school..."
- "Hardly a day goes by without some creative new take on the eternal Evil White Man meme. Without..."
- "There would be no controversy if it were all balloons and ponies stories like that. But I hope..."
- "Let's talk about this disaster: I lost a course at the university where I work and became ineligible..."
- "Partisan nastiness doesn't advance dialogue. We are all in this together. You asked for solutions..."
- Battle of Britain: NGOs and scientists clash over proposal to loosen EU GMO restrictions
- Genetically modified clean energy from bacteria
- Designer babies: You can screen for cystic fibrosis but intelligence is a ways off
- Science as profane: What superstition of 1752 and 2014 share in common
- What’s so “natural” about “natural crop breeding”?
- Worried you have cancer? Take a Google pill!
- Report examines health care challenges for pregnant women enrolled in covered California
- NYU research: Majority of high school seniors favor more liberal marijuana policies
- ESA Frontiers November preview
- Sexual fantasies: Are you normal?
- Synthetic lethality offers a new approach to kill tumor cells, explains Moffitt researcher