March 3, 2005 - As it is presently structured the Social Security System is financed by a flat rate tax on work. Weather the taxpayer works for another or is self-employed the first $90,000.00 earned is subject to the same 12.4% tax. The system rewards success and investment. Every dollar in earnings over $90,000 is tax free. Every dollar of income generated by savings or investment is tax free. Because of the changing demographics of the population the actuaries tell us that in 13 years the tax on work will result in less money being paid into the system than is needed to pay the retirement benefits promised to retiring workers. They also tell us that the excess tax collections accumulated since in the 70 years the system has been operated will be exhausted by 2042 according to one projection and by 2052 by another. Thereafter the payroll tax will generate only 72% of the money required to cover the promised benefits. In order to address this apparent dislocation the President proposed to permit workers who will retire in 2018 or later to divert 1/3 of the payroll tax on their earnings into privatized investment accounts.

He is busily traveling the country selling his scheme as a reform of Social Security – the threshold of what he calls “The Ownership Society”. Will it solve the coming imbalance between income and outgo? The answer is no. In fact it will aggravate it. It is a loss leader in his drive to sell privatization of the Social Security System and alter the terms of the contract America has had with its workers. It won’t add one cent to the system’s receipts and it won’t reduce the outgo by a penny. It would materially reduce the receipts of the system between now and 2018 making the date on which the accumulated funds start to deplete that much nearer. We know that and the President knows it and his White House admits that his privateer raid on retiree’s bulwark against want won’t solve the fiscal problem on the horizon.

There is merit to the idea of government administered personal investment accounts but it doesn’t lie in reforming the Social Security System. That is an area that the President and his party have not addressed. Reforming Social Security should mean a combination of tax relief for American workers; providing every American with the opportunity to participate in the American dream; and securing to each American a retirement free of want. As a first step in Securing Social Security the cap on taxed earnings should be removed and the tax extended to all income, regardless of its source. The second step is to exempt from that tax the first $12,400 of each taxpayer’s income. The third step is to reduce the FICA tax rate to 8.4%. The last step is to permit each taxpayer the election to make an income tax free contribution of up to 3% of his income into a personal investment account administered by the Social Security Administration and assured on the same basis as private industry’s pension plans are now.

A program to reform Social Security must include much more than high sounding slogans and promotional gimmicks. A program to assure that the Social Security safety net is there for our children and our grandchildren must include both revenue enhancement for the system and tax relief for the American’s who need tax relief the most. It should include the enhanced opportunity for Americans to participate in what the President calls the Ownership Society. It must secure Social Security without piling more on to the mountain of debt that the Bush Administration has already piled up.