Social Security cannot afford to pay all of the benefits it has promised. Beginning in 2017, it will run cash deficits that get bigger every year
Many opponents of personal accounts for Social Security reform create a false choice between personal accounts and “solvency.” What they fail to acknowledge is that personal accounts, if structured correctly, make the system solvent by themselves. Some prefer, though, to enact painful benefit cuts to make Social Security solvent—a sure lose-lose proposition. Since 1983, one such benefit cut has been a cleverly-disguised tax on Social Security benefits—merely a benefit cut using IRS means. Single seniors making more than $25,000 and senior couples making more than $32,000 face steep taxes on their benefits. These thresholds have never been indexed to inflation, so this means that eventually all seniors will pay taxes on Social Security benefits. President Clinton increased the benefit cut for seniors by exposing even more benefits to taxation—originally billed as a “tax increase on the rich.” This teaches all of us a valuable lesson: a benefit cut on “the rich” eventually becomes a benefit cut on us all, worsening the already bad Social Security deal for younger workers.
Social Security has a problem, and we need to fix it. Personal accounts are the solution.
Benefit Cuts Disguised As Tax Increases
Source: Internal Revenue Service