Social Security - A Thoughtful Approach

I've been doing some research and have found that our SS benefit payment is just about the highest in the industrialized world. For example, your average Canadian pensioneer receives about $440 CDN per month (!!!). So our benefit, roughly $1,100 a month per retiree, is pretty good. Of course, God forbid you actual have a private annuity or pension, in which case your SS benefit is taxed up to 85% (As of 1993 - Thanks, Bill!).

Traditionally, Social Security reforms are proposed by a bipartisan commission. The most successful of those was in 1983 - when the system was truly in crisis.

Do we have a benefit crisis now? No. Even the most ardent doomsayers say that we're operating at a surplus for the next 13 years. However, there is a taxation issue: SS taxes keep going up. While the tax rate hasn't changed in a few years, the taxable income cap has ballooned, in the last few years from $75,000 to $83,000 to $86,000 and, next year, to $90,000.

So when a Democrat or Republican tell you they haven't raised SS taxes, that's plain bullshit.

Right now, we have both parties screaming. The GOP is screaming crisis, and the Democrats are screaming about risks and hidden benefit reductions. It's really confusing and hard to get an objective read on what works best.

The Democrats have discussed raising the taxable SS cap to $200,000. While this certainly would solve the problem, it's inherently unfair to high-income earners because, after taxes, they will never collect a fraction of what they have paid. Sometimes I think the Democratic concept of fairness ends at about the $100K a year level, on the other hand, one could argue I suppose that those at higher income levels aren't as affected by this tax.

Another problem is survivor benefits. When you die, except for a small survivor benefit to your spouse and minor children, all other monies are returned to the government. There is nothing to pass on to your family regardless of the ratio of SS taxes paid versus collected benefits.

I'm still on the fence as to what should be done to the program, but I'd like to see the following revisions:

1. A death benefit should be paid to a deceased's estate, proportional to any surplus between his lifetime contributions and total benefits paid...perhaps equal to 10% of the surplus. I think that's fair.
2. Employers should be encouraged by corporate tax benefits to increase their contributions to individual's IRA or 401Ks. If an employee doesn't have a 401K, the employer could establish one and contribute regardless of employee contribution.
3. Raise the SS income cap to $250,000, but create a bottom cap of $35,000 - no income below that level is SS taxed. Reduce the actual tax rate by 1%.
4. Here's one for the Bush 'ownership society' initiative: Exempt seniors from property taxes on the first $250,000 of taxable value of their primary residence - have those tax revenues substituted by a federal property tax on investment properties and vacation homes.
5. Subsidize via tax deduction the individual purchase of local, state, and federal bonds as retirement investments.
6. Put together a test group of 1,000 wage earners. Allow them to invest 4% of SS in sanctioned investments as Bush wants. At the end of 5 years, bring in an independent auditing firm to compare where the test group is compared to where they would be normally, and study the impact on SS Trust Fund revenues.

So these are my crazy ideas. Any thoughts?