Most Social Security reform proposals would result in fewer benefits for future retirees, but if the program pays out less in benefits, the payroll taxes needed from younger workers to support the program would be lower than they would be to fully fund benefits under the current program.
A new study by the National Center for Policy Analysis analyzed all of the different proposals to reform Social Security, including progressive price indexing, changing the benefit formula, raising the retirement age and eliminating the maximum taxable wage.
The study found that raising a 41-year-old middle-income man's retirement age to 70 would reduce his lifetime benefits by about $60,000. But since his taxes would fall by about $40,000, compared to the taxes necessary to fully fund benefits under the current program, the lower tax burden would offset two-thirds of the benefit loss. Raising the retirement age for the 41-year-old earning a poverty-level wage would reduce his lifetime benefits by about $26,000 but his lower tax burden offsets about 40 percent of the benefit loss. For a very high income worker (16 times the poverty level), the lower tax burden would offset 90 percent of the benefit loss.
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