Address Social Security Solvency

The Problem:

The Social Security Trust Fund is projected to run out of money in the not to distant future. The current policy suggestions for preserving the fund solvency include two ideas:

• Increase the retirement age where one would qualify for full benefits
• Decrease the amount of benefits paid to each recipient.

A third option has never been discussed or explored: Remove the cap on social security taxable income.

Currently, employees contribute 6.2% of their pay, and employers contribute and additional 6.2% of pay on behalf of that employee (total: 12.6%), but this amount only applies to the first $176,100 of each employees annual income. In addition, income from interest, capital gains and dividends is not included as Social Security taxable income.

See: https://www.irs.gov/taxtopics/tc751

The Solution:

• Determine what level the exemption limit of taxable social security wages should be in order to insure the solvency of Social Security and immediately increase the income limit to that new level.
• Study what contribution would be necessary by removing the cap on social security taxable income and by making income from interest and dividends subject to tax for purposes of Social Security.