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Social Security by committee

By Jennie L. Phipps · Bankrate.com
Sunday, July 7, 2013
Posted: 7 am ET

The angry responses just keep on coming to the retirement planning blog in which there was a suggestion that the minimum age for claiming Social Security be raised to 63 or 64.

Many of the more than 1,000 comments suggest that taxing the wealthy would solve all of our problems. The Third Way, a centrist, nonpartisan think tank, has considered the notion of making the rich pay more, and it concluded that it won't work. Here are its calculations.

If the U.S. imposed a top tax rate of 49.6 percent on all millionaires and required them to pay at least 30 percent in taxes, and if it raised the estate tax to 45 percent on anything above $3.5 million, the result still would be a $1.3 trillion deficit in 2030 -- figured in 2013 inflation-adjusted dollars.

Another suggestion raised frequently in response to the blog is raising the Social Security payroll tax cap so people earning more than $113,700 continue to pay. The Third Way calculates that eliminating the payroll cap completely without increasing the amount that high-earners get in Social Security payments at all would eliminate only 79 percent of the shortfall.

I don't think anyone would disagree that the political will to do any of these things is small. To get around that problem, Third Way suggests naming a bipartisan commission and giving them a mandate to figure out a solution that would include raising taxes and cutting Social Security benefits so that the program remains solidly in place for future generations.

Passage of their plan, Third Way says, should require only a 50 percent majority from Congress without the possibility of making any changes. A simple thumbs up or thumbs down would be the only way Congress could vote.

That would take the politics out of reform. Otherwise, by 2024, 23 percent of the voters will be older than 65 with very little motivation to support a Congressperson who voted to change Social Security in any way.

What do you think of that plan? Could we solve our Social Security and retirement problems by naming a committee? What would you do if you were on it?

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