Social Security suffers from a “missing trust fund” that could be restored by increasing taxes in any of several ways, according to a report from the Center for Retirement Research.
The Social Security trust fund is projected to run out in 2034, after which the system will be unable to pay the full amount of benefits due.
“The current ‘pay-as-you-go’ approach is the result of the policy decision made decades ago to pay benefits far in excess of contributions for early cohorts of workers. By paying benefits in excess of contributions to early cohorts, the nation essentially gave away the trust fund that would have accumulated and, importantly, gave away the interest on those contributions,” it said.
The pending Social Security shortfall has been the subject of numerous studies over the years by governmental and non-governmental experts, who consistently say that increased taxes, lowered benefits, or a combination will be necessary. The newest report focused only on tax options.
It said that there are two basic possibilities to put Social Security on a stable footing–keeping the same structure and increasing taxes enough to fully fund it on an ongoing basis, or increasing them by even more temporarily to rebuild the fund to the point where it has a surplus and is also being funded by interest credited by the Treasury.
Options for tax increases, it said, include increasing the payroll tax rate, increasing it along with eliminating the payroll tax cap, or imposing a general increase in income taxes instead.