The Congressional Budget Office has said there are numerous options, some more fiscally painful than others, for shoring up the Social Security system’s finances, which under current law setting income and outgo will be enough to pay only about three-fourths of the currently promised benefit levels after their accumulated surpluses are exhausted.
CBO noted that by its calculations—others differ somewhat—the program’s disability insurance trust fund will be exhausted in 2017 and its old age benefits trust fund will be exhausted in 2031. Both are funded by payroll taxes of 6.2 percent of salary from covered workers and the same from their employers, up to an annual limit. Of the 6.2 percent in each case, 1.8 points of that goes to the disability trust fund.
If current benefit levels are kept, to assure the needed money is available through 2087, the longest CBO projects, would require an increase of 0.7 percentage points from both employees and employers for the disability fund and 2.8 points for the old age fund. That would mean, for example, a tax increase of $900 for a worker earning $50,000.
Another option would be a 2.3 percentage point increase, while also raising the maximum portion of salary that is subject to the Social Security tax, CBO said. Raising it to apply to 90 percent of Social Security-covered earnings, rather than the current 83 percent, would require more than doubling the threshold on which the tax is charged, to more than $240,000.
Yet a third option would be to increase the tax by 1.6 percentage points and apply it to all Social Security covered earnings, CBO said.
Under the latter two options, one variant would be to increase benefits for those paying in above the current maximum so that they are getting at least something for the extra contribution. The added benefit could be structured so that it is not as generous as the current formula, CBO said, although that in turn would mean raising the percentage increase proportionately.