I have to write solutions on how to solve the social security problem (the amount to pay retirees will exceed the amount collected to finance the program.)
The solutions are, raising the taxes that finance S.S. and Paying S.S. benefits only to people who earn less than a certain amount of money. I need a pro and con for each. Any help ?
Raising the S.S. taxes on working people will give them less to spend on consumer goods that boost the economy.
Raising S.S. taxes will bring them more into line with the amounts they used to be. The rate in 2013 was the same as it was 24 years ago.
If only people below a certain income receive benefits, this doesn't seem fair to those who paid in more but can't collect.
People with a high income probably don't need social security payments.
Thank you Ms. Sue!
You're welcome, Meghan.
Certainly, I can help you with that. Here are pro and con points for each solution to solve the social security problem:
1. Raising taxes that finance Social Security:
- Pros:
- Increased revenue: Raising taxes can provide more funding to support the Social Security program, ensuring the sustainability of benefits for retirees.
- Shared responsibility: By increasing taxes, it distributes the burden of funding the program among a larger proportion of the population, potentially reducing financial strain on individual taxpayers.
- Limited impact on low-income earners: By implementing progressive tax policies, the increase in taxes can target high-income individuals more heavily, thereby minimizing the impact on lower-income earners.
- Cons:
- Economic burden: Higher taxes can reduce individuals' disposable income and potentially hinder economic growth by decreasing consumer spending.
- Opposition and political challenges: Raising taxes is generally met with some resistance, as it can be perceived as an additional financial burden on taxpayers. It may face challenges in implementation due to disagreements and differing political ideologies.
- Potential disincentive: Higher taxes could discourage individuals from earning more income, as they may feel that their increased earnings will be offset by higher tax liabilities.
2. Paying Social Security benefits only to people who earn less than a certain amount of money:
- Pros:
- Targeted assistance: By limiting benefits to individuals who earn less than a specific threshold, it ensures that those in genuine need receive support, thereby reducing the strain on the Social Security program.
- Enhanced fairness: Restricting benefits to those with lower earnings can be seen as a more equitable distribution of resources and a way to narrow income inequality.
- Potential cost savings: Limiting benefits to lower-income individuals can help mitigate the financial strain on the Social Security program, potentially ensuring its long-term sustainability.
- Cons:
- Increased poverty risk: Restricting benefits solely based on earnings can leave some retirees, who may have modest earnings but still fall outside the threshold, financially vulnerable and at risk of experiencing poverty in their retirement.
- Limited contribution recognition: Some argue that the current system is based on the premise that everyone pays into Social Security throughout their working lives and is then eligible to receive benefits upon retirement. Restricting benefits may be seen as undermining this fundamental principle.
- Complex administrative challenges: Determining and regularly updating the income threshold for eligibility can present administrative hurdles and potential exclusion errors, thus requiring a robust and efficient implementation mechanism.
Remember to consider these points as part of a broader analysis and discussion while formulating recommendations to address the social security problem.