Unbundling Social Security from the Payroll Tax

Authors

Henry Ordower, Saint Louis University School of Law

Document Type

Working Paper

Publication Date

2023

Keywords

social security, payroll tax, regressive tax, tax expenditures, benefits, tax history

Abstract

To preserve social security as a welfare program primarily for older individuals and to ameliorate the distributional inequity of funding social security across income and wealth levels, this article recommends unbundling the benefit side of social security from its longstanding payroll tax funding mechanism. The article recommends replacing the payroll tax revenue with a budget allocation from general revenues accompanied by both revenue raisers and benefit limitations. Income tax rate increases linked to repeal of the FICA tax and tax expenditure limitations would enhance income tax revenue. Modifying social security benefits from their current overinclusive, entitlement structure for all to moderately needs-based entitlement possibly freed from the constraint of the current contribution requirement that makes social security underinclusive would help provide the older population an income facilitating dignified aging.

Recommended Citation

Ordower, Henry, Unbundling Social Security from the Payroll Tax. Saint Louis U. Legal Studies Research Paper No. 2023-04.