Are Workers Ready to Give-Up 17.3% of Their Pay to Save Social Security?

Dec 28, 2022 | Finconomics 101, No Bull Economics

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According to CBO projections, spending for Social Security increases rapidly in relation to GDP over the next decade as members of the large baby-boom generation retire. If the program’s trust funds were combined, their exhaustion date would be in 2033.

Key Points:

  • Social Security spending is forecasted to rise throughout the Congressional Budget Office’s 75-year projection period because of expected increases in life expectancy. However, unlike outlays, SS revenues are expected to remain stable in relation to the size of the economy.
  • The federal government could maintain the necessary trust fund balances through 2096 if it immediately, and permanently, raised payroll tax rates by 4.9 percentage points (or implemented an equivalent reduction in benefits or combination of tax increases and benefit reductions).
  • Currently, the payroll tax rate is 6.2% for the employee & 6.2% for the employer (or 12.4% of total pay on the first $147,000 in salary). Since a reduction in SS benefits would be political suicide, the CBO is suggesting that to save SS this rate would have to increase to 17.3% of total pay.
Social Security Graph
Social Security Graph
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