Economics

23 Pages 5773 Words

pletely replace the traditional Social Security system with individual accounts and a public system of minimum benefits. In contrast, MF and NCRP retain something that looks very much like the current Social Security system. This seems to me to be a more feasible approach, and therefore, the testimony focuses on these proposals.

The MF proposal provides a refundable credit against income taxes equal to two percentage points of the payroll tax and mandates that the proceeds be deposited in an individual account. Social Security benefits are reduced upon retirement by 75 cents for every dollar of retirement income derived from the individual account.

The NCRP proposal reduces payroll taxes directly by two percentage points. The proceeds are also deposited in a mandated individual account. The tax reduction and the approximately two percentage point deficit in the Social Security program are financed in the long run by slowing the rate of growth of benefits. This is done primarily by gradually increasing the normal and early retirement ages ...