Proposals

Truth About Social Security ("TASS") Plan
Alternate Tax Basis (Optional change)

While this proposal has been based on the continuation of a separate tax on salary, we would like to see the employee's portion of the tax changed to a surtax on taxable income (the same basis used to determine income tax).

Such change is totally independent of resolving Social Security's projected shortfall or the other changes we have proposed. It's intent is to remove the regressive nature of the current tax. While the regressivity is also accomplished, in part, by removing the cap on salary, it remains in that other form of income (most typically found among the more wealthy) are exempted.

While the "typical family" of four is able to protect the first $22,100 from federal income tax, that same amount If earned as salary) is subject to a Social Security tax of $1370. In fact, for a significant portion of the population, the Social Security (and Medicare) taxes represent over half the taxes paid to the federal government.

Further, it would seem that such a change should reasonably impose an additional limit on the amount workers could contribute to an individual account -- the amount paid in the surtax.

Because such a change would eliminate many employee contributions and, therefore, any eligibility for individual accounts, such a change would place a greater burden on the Trust Funds than our proposal without shifting to the taxable income base. Even a revenue neutral change would also shift the burden up the economic scale -- because it exempts the non taxable portion of income and because those who earn more tend to have a greater portion of their taxable income from non-salary sources that would now be subject to this surtax.

Unfortunately, as of this time, we do not have the data to reasonably project the surtax rate, even assuming no change in burden on the Trust Funds, so we can't give an estimated figure we feel entirely comfortable with. The best we do is offer the crude analysis that, in 2001, taxable income reported by individuals equaled $4.3 trillion and social security receipts from employee contributions equaled $220 billion, so the equivalent revenues would be derived from a surtax rate of something in the area of 5% of taxable income. (This would seem to be less than the rate cuts given in 2002.) On the same basis, it would seem that the temporary tax to fund the transition would be on the order of .8% of taxable income.

This change would not affect the Employer's contributions, which would remain 6.2% of payroll (uncapped), and the additional .9% to fund the transition.