Social Security Plus

Steven Hill, the author of Europe's Promise, suggests an alternative that in our opinion would do far more to enhance the greatest good for the greatest number over the longest run. He believes that because defined benefit pensions are disappearing and other sources of savings such as home values and stock ownership have proven notoriously unstable, we must actually strengthen Social Security so that it pays more, not less, as many budget cutters have advocated.28

Hill says we should double Social Security benefits from about one third of annual income upon retirement to about two thirds, or roughly the European benefit level. He points out that 40 percent of Americans depend on Social Security for 84 percent of their retirement income. Even the top 40 to 20 percent of income earners depend on Social Security for a majority of their retirement income. Only the richest 20 percent can get along without it.

Hill's idea — he calls it Social Security Plus — would cost $650 billion a year, not chump change. Some revisions would be needed to keep Social Security performing effectively and securely in the black, while expanding its payout. The most obvious is to lift the cap on required contributions. Currently, Americans only pay Social Security taxes on up to $106,000 of their earnings, and none at all on income derived from interest and dividends. Collecting the Social Security tax on all incomes would bring in about $377 billion a year in added revenue and make possible improved Social Security payouts while helping ensure the system's health for many more years.

Moreover, Hill points out that if Social Security payouts were roughly doubled, those employers who do provide pensions would no longer need to do so. Currently, corporations receive $126 billion a year in tax deductions for these provisions, money that could go into the Social Security system. He also suggests eliminating some other tax deductions that overwhelmingly benefit wealthier taxpayers. Together, Hill says, “these three revenue streams would raise 100 percent of the revenue needed for doubling the payout of Social Security Plus.”

Hill believes his plan would be fairer and more secure while making retirement benefits fully portable and eliminating a benefit provision that actually does make American companies less competitive. We agree.

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