I heard a few minutes of President Bush’s press conference this morning. Apparently, we are on the cusp of armageddon because social security payroll taxes may increase to 18 PERCENT!
Sounds pretty bad, right? Except for the fact that the taxes are currently 12.4 percent, and most likely that 18 percent figure would only occur if we did nothing for 40 years, the trust fund ran out, and we were forced to fully fund social security from payroll taxes alone. Oh, and the fact that it really amounts to an increase of 2.8 percent of income (remember, payroll taxes are split between the employer and the employee, so that 18 percent is really 9). Which amounts to $2500 per year in today’s dollars even if you made enough to hit the cap of $90,000 in income.
So, in other words, if we do absolutely nothing to adjust the system slowly over the course of 40 years, AND the projections which have been consistently pessimistic hold true, we will need to pay an extra 3 percent of our income to make sure everyone can get fully-funded social security benefits.
Some crisis.
