The privatization of Social Security, high on President Bush's agenda this year, is not enough to address the program's looming shortfall, says House Ways and Means Committee Chairman Bill Thomas (R-Calif.). At a pre-inaugural forum sponsored by National Journal magazine on Tuesday, Thomas said the problem of funding the Social Security system would not go away by creating personal accounts, The Wall Street Journal reports.
Thomas indicated that changing or getting rid of payroll taxes altogether might offer a solution. He said the payroll-tax system was detrimental to lower-income workers and to long-term job creation. While offering little in the way of alternatives, Thomas merely said, "There are other ways."
Right now, Social Security payroll taxes amount to 12.4% of wages, split between workers and employers. But with retirees expected to outnumber workers by 2018, downward pressure on revenue is anticipated. Thomas asked for a plan that tackled Social Security and tax-code reform together. Recently, President Bush commissioned a tax-reform advisory panel to study possible alternatives and report back to him this summer for potential legislation next year.
Faced with a similar problem, other countries such as Germany, Italy and New Zealand have dealt with it by increasing the retirement age for public pensions. Thomas warned against doing so here because, he said, it could be harmful to workers who do physical labor and might provide an incentive to many workers to take early-retirement benefits at age 62.