My Plan for Social Security Reform

This is a post of why the libertarian in my believes we should fix the Social Security(SS) problem by not giving benefits to everyone.  Privatized SS will be a post for another day.

After reading Tax Shift, I firmly believe SS is the worst form of tax.  First it taxes income or productivity and secondly and it is regressive. If you make over a certain dollar amount, you don't have to pay SS.  This means it is a tax on the poor and middle class only. 

Let me take a step back though.  Yes SS is a tax!  It is not a retirement plan.  There is no guarantee that a person will get back what the put into it.  Therefore it is a tax!

I don't think that the premise of SS is all bad.  It is not realistic to think that all people will retire and still have an income that will support them.  Or if a breadwinner dies or is injured, then will be able to support a family.  So some type of social security net is necessary.  SS is what we have now and I am proposing how it might work better.  There are surely better systems to solve this problem, but that is not the point of this post.

There are two parts of the SS system.  One is collecting funds and second is distributing the funds.  It is a simple system and it will fail when funds distributed are greater than funds collected.  My first proposal is that all workers pay into SS.  This way the tax is no longer regressive. 

Secondly after lots of thought, I think payouts should become need based.  I think everyone who pays in should be guaranteed a fixed amount of monthly income, say $2000.  If a person has another retirement plan, then they may not receive all or any SS benefit.  If you have plan that pays you $1500 a month then maybe you will only collect $1200 in SS.  Or if your plan pays you over $4000 a month then you don't collect any benefit.

At first thought, this may seem unfair.  "I payed money into SS my whole working life so I deserve to receive a benefit!"  Well, the libertarian in me says wait "Do I want to depend on the government for retirement income?"  Hell no!  So, I would rather not receive benefits (unless something tragic happens to me of course).  So given the choice, I would prefer paying a smaller SS tax and not receiving benefits then paying a bigger tax and receiving them.  Because, this is the option.  It is a simple system either collect more or payout less.  I opt for payout less and I will attempt to save for my own retirement.

Comments

[jeffy]

I don't know much of anything about how SS works now, but I wonder how hard a needs-based system would be to administer. How hard is it going to be for someone with a $500 pension to prove that they need a $1500 benefit? Seems like any kind of reporting requirement favors the rich and/or well-educated. Otherwise, I'm right there with you.

[erik]

I totally agree with you jeffy. Government programs that create a complicated bureaucracy don't make since. I was thinking for this one, SS could just use the filings from national income taxes. I am quite sure you have to report retirement income.