I think you need a real and honest accounting of Social Security first. I don't know how much inflation the politicians and the Fed are willing to accept, and how far the Fed and the politicians are going to manipulate the CPI to keep SS benefits low.
Options # 1 is a fallacy. The current state is to buy back privately held bonds with SS funds. In the SS trust fund, as long as the real inflation rate is higher than the government-configured CPI measurement, the bonds will erode in value. I suspect they plan to use future funds buoyed by inflation to pay the inflation-eroded bonds when they come due.
Option # 2 would also those make the SS system even more regressive than it is now. People with tax credits, deductions, etc. would be essentially opting out of paying SS taxes without a corresponding decrease in their benefits. It's bad enough now that the Earned Income Tax Credit is allowing many to opt out of the FICA taxes. If you're going to do this, have a limit of refunding FICA taxes to $ 500 and allow people to deduct their IRA, 401K, 403B, and Keogh contributions from their FICA wage. It appears the Democrats planned all along to make SS into another welfare fund.
Option # 3 is a possibility. I would prefer to see decreases in the first two tax brackets first: 17 percent down to 10, and 31 down to 20. I would also prefer to see the Earned Income Tax Credit eliminated, elimination of tax deductions for home equity loans, etc. and start paring down the tax code. I think Bush is moving with his plan toward a private system to rival SS. I think he should also reinstate the pre-tax contribution status for 401Ks and 403Bs, and have IRA contributions also count against the FICA tax as well. |
