Real Social Security Reform

Small Business Encourages Market Based Reform

SMALL BUSINESS WATCHES SOCIAL SECURITY REFORM WORK FOR PERSONAL RETIREMENT ACCOUNTS

The National Federation of Independent Business


Small-business owners, like all Americans, are concerned about the future of Social Security. Their perspective on the issue is unique, as it is both that of the future retiree and of the employer paying the payroll taxes.


The problem for small business

  • According to Social Security trustees, if nothing is done to fix the problem with Social Security, the program is expected to become insolvent by 2052.

  • Over the next 50 years, the number of workers available to support each Social Security beneficiary will drop from a rate of 3.4 to 1 to only 2.1 to 1. The cost of supporting the current system will increase 69 percent during that period. (Strengthening Social Security and Creating Personal Wealth for All Americans, Report of the President’s Commission, December 2001, p.34)

  • According to the Congressional Budget Office, approximately 80 percent of Americans pay more in payroll taxes than in federal income taxes. (Congressional Budget Office, Economic Stimulus: Evaluating Proposed Changes in Tax Policy, January 2002, p.12, footnote 7)

  • A 25-year-old male with an average income is predicted to receive a –0.82 percent rate of return on his Social Security taxes. In other words, he will pay more into the system in taxes than he will receive back in benefits. (How to Fix Social Security, by David C. John, The Heritage Foundation, Nov. 17, 2004)


NFIB advocates four principles to ensure Social Security reform
is fair to small business:

  • Individually controlled Personal Retirement Accounts should be a major part of any Social Security reform. An NFIB member ballot question in 2005 found that 71 percent of members believe that Social Security should be reformed to allow individuals to invest in PRAs.

  • Payroll taxes must not be increased. Small business owners not only pay their own Social Security payroll taxes, they also contribute taxes on behalf of their employees. Reform will cost money; however, NFIB members oppose increasing payroll taxes as afinancing option.

  • Social Security reform should not increase paperwork burdens on employers. A principal small-business concern about Social Security is administrative complexity. Reform plans must take steps to ensure that paperwork burdens on employers are not increased. 

  • Social Security should continue its commitment to provide benefits to retired workers. Eighty-five percent of NFIB members believe that even with private accounts, the program should remain mandatory and that retirees should receive a minimum benefit.

 

 

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