contributed to the Social Security system for the duration of their careers and were subject to higher payroll tax rates.Social Security's Payroll Tax Is RegressiveIn 1998, Social Security’s 6.2 percent payroll tax was assessed on only the first $68,400 of a worker’s earnings. Because unearned income (interest and capital gains) is not subject to taxation under a payroll tax and earned income beyond $68,400 is not taxed, wealthy individuals pay a lower fraction of their total income in Social Security taxes than other people.Social Security May Encourage Early Retirement, Putting Added Pressure on the System Over the past fifty years, older Americans have been retiring at a progressively younger age. In 1950, 83.4 percent of men aged fifty-five to sixty-four were employed; by 1990, only 67.8 percent of men in this age group were working. Today, most men and women retire before age sixty-five; in fact, almost 60 percent receive Social Security benefits at age sixty-two, when reduced benefits for early retirement first become available. Some economists are concerned that earlier retirement, combined with increased longevity, exacerbates the problem of economically sustaining an aging population. If the trend toward early retirement continues as the population ages, an even smaller share of workers will be supporting a larger proportion of retirees.Social Security - The OptionsHistorically, politicians have had a simple, consistent position on Social Security: Do nothing. Democrats steadfastly opposed tinkering, concerned that any changes would erode the safety net provided by a program they revere as the greatest and most inviolable legacy of the New Deal. And while many Republicans consider Social Security the ultimate Big Government program – with plenty of social engineering thrown in for good measure – they learned over time that its popularity with the voters made it untouchable. Facing the irreversible demog...
