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first $106,800 of wages, a smaller percentage of the nations’ income is now subject to the Social Security payroll tax than earlier. (Domenici/Rivlin, 71) We will need to slowly both increase the income subject to the payroll tax and reduce benefits. Domenici/Rivlin’s suggestion to divide the burden 50-50 on these two measures is probably a wise principle. (Domenici/Rivlin, ) Among the next steps we support are: a. Increasing the allowable age for early and full retirement Under current law, the normal retirement age will be 67 in 2027. Simpson/Bowles recommend gradually increasing the normal retirement age to 68 by 2050 and 69 by 2075 and also increasing the early retirement age to 63 and 64 in lock step. (5.4, p. 50) We support these changes. b. Change to a more accurate annual cost of living adjustment --sometimes called the “Chained Consumer Price Index.” (Domenici/Bowles, 15; Simpson/Bowles, 5.7, pp. 51-52) c. Increasing the taxable maximum of the Social Security tax progressively over ten years, eventually subjecting all income to a Social Security tax. Currently, only the first $106,800 of wage and salary income is taxed for Social Security benefits. Simpson/Bowles recommend slowly increasing that amount to $190,000 by 2050. (5.6, p. 51) We favor faster change: complete the change in ten years (by 2021). In addition, link the $190,000 figure to inflation. Also tax all wages above $190,000 at a lower rate of 3%. d. Over ten years, progressively apply the Social Security tax to investment income as well as wages e. Slowly reduce the growth in benefits for approximately the top one-quarter of recipients Currently, retirees receive 90% of the first $749 of the worker’s average monthly earnings; 32% of the average monthly earning between $749 and $4517 and 15% above that. Starting in 2023, slowly reduce that top bracket from 15% to 10% over 30 years. (Domenici/Rivlin, 76) f. Including all newly hired state and local government workers in Social Security (Simpson/Bowles, 5.8, pp. 51-52; Domenici/Rivlin, 79) g. Update the special minimum benefit and protect the most vulnerable Social Security has a special minimum benefit to help the poorest, but it is not indexed to wage increases. Starting in 2012, increase the special minimum benefit to 133% of the federal poverty level for retirees with at least 30 years of creditable work. We also need a reasonable increase in SST benefits. Also, add a modest increase in benefits for very elderly folk who often outlive their savings. From ages 81-85, increase their benefits by 1% per year. (Domenici/Rivlin, 80) IV. TAXES AND TAX REFORM The current federal tax code is hopelessly confusing, complicated, and unfair. Because of thousands of exemptions for all kinds of things, people are not treated equally and the treasury loses $1.1 4

Concrete Proposal for Intergenerational Justice  

proposal for IGJ campaign