Worker half of payroll tax would be saved, invested in personal account worker would own and control
WASHINGTON — Americans for Tax Reform today praised the “6.2% Solution,” sponsored by Congressmen Sam Johnson (R-TX), Pat Toomey (R-PA), and Jeff Flake (R-AZ). The bill would allow younger workers to save their portion of the payroll tax in a personal retirement account (PRA) that they would own and control.
Workers under the age of fifty-five could choose to save their 6.2% payroll tax in a personal account. Prior taxes paid to Social Security would be deposited in the account via a recognition bond. Upon retirement, the PRA money would be tax-free, much like a Roth IRA. In the event of death, the saved money could be passed along to family members and loved ones.
“Social Security must be fixed,” said Americans for Tax Reform President Grover Norquist. “The system simply will not give younger workers the same safety net that their parents and grandparents have come to expect.”
According to the non-partisan Social Security Administration, the current system will not be able to pay promised benefits beginning in 2018, a mere fourteen years from now. In order to deliver what Social Security promises but cannot pay, payroll taxes would have to rise by more than 50%, or benefits would have to be cut by a third, or some combination of the two.
"The real solution is to give power to ordinary Americans,” continued Norquist. “Workers need to be given greater ownership of their retirement future. For more than two decades, they have had a measure of that with IRAs and 401(k) plans. A majority of households and 70% of voters own equity as a result of that control. PRA plans for Social Security will save the system from bankruptcy, but they will more importantly give every American a stake in saving for retirement.”