The Social Security trust fund will go bankrupt in 2033 according to the Old-Age, Survivors, and Disability Insurance (OASDI) trustees. With neither Democrats nor Republicans appearing willing to reduce benefits or increase the retirement age, the only way to make Social Security solvent is to increase revenue. While this can be done, it will come at the great financial detriment of young people entering the work force who are already struggling with the cost of living.
Romina Boccia and Ivane Nachkebia, director and research consultant for budget and entitlement policy at the Cato Institute, respectively, calculated just how expensive eliminating the Social Security shortfall would be. The researchers cite the OASDI's trustees' report, which concludes that, to eliminate Social Security's projected $25 trillion deficit over the next 75 years while maintaining planned benefits, "Congress would need to raise the payroll tax rate immediately and permanently by 3.65 percentage points."
Increasing the payroll taxes that fund Social Security from 12.4 percent, the current payroll tax rate, to 16.05 percent may not look intimidating on the page, but Boccia and Nachkebia explain what this rate hike means in dollar terms for the young people entering the work force in 2025. The median 22-year-old worker, who starts with an annual income of $66,636 and retires at 67 years old, would pay an additional $2,432—roughly two weeks of pay—every year, translating to an additional $110,000 of payroll tax throughout his working life.
