In a recent column, I discussed the issue of the future of Social Security. I pointed out that there are many ideas for reforming Social Security that will keep the system solvent for generations to come. I told you that my book, "Social Security — Simple and Smart," has a chapter that explains Social Security financing and also includes eight very workable proposals for reform. And I promised I would share others in an upcoming column. So here they are.

These proposals come from the highly respected Committee for a Responsible Federal Budget. It is a think tank whose members advocate for public policy to reduce the federal budget deficit and lower government spending. Its members include former heads of House and Senate budget committees, the Congressional Budget Office and the Government Accountability Office.

As I pointed out in last week's column, any serious and balanced package of Social Security reforms would include ways to increase revenues and decrease spending. So here are some of the CRFB proposals. And note that each proposal includes a "fix percentage." In other words, if that proposal were enacted, it would solve X% of Social Security's long-range funding problem.

On the revenue side, they suggest:

— increase the payroll tax by 1% (28% fix)

— eliminate the taxable wage base (68% fix)

— subject cafeteria plans to the payroll tax (10% fix)

— cover all newly hired state government workers (3% fix)

On the spending side, they suggest:

— reduce initial benefits for higher earners (34% fix)

— raise the retirement age to 69 and index for life expectancy (36% fix)

— increase years used to calculate benefits from 35 to 40 (13% fix)

— calculate cost-of-living increases with a "chained CPI" (18% fix)

Here are explanations of their revenue-increasing proposals.

The current Social Security tax rate is 12.4%, split equally between employees and employers. Raising the rate by one percentage point, again split equally between employees and employers, would close almost one third of Social Security's solvency gap.

An even bigger fix would be obtained by eliminating the amount of income subject to the payroll tax. Currently, that tax cap is $184,500. In other words, higher-income earners stop paying Social Security taxes once they make $184,500. This proposal, which would make them pay taxes on all their earnings, would, by itself, close 68% of Social Security's long-range funding gap.

So-called "cafeteria plans" let employers offer employees fringe benefits on a pre-tax basis. Eliminating the deductibility of these plans would get Social Security 10% closer to long-range solvency.

About 20% of state and local government employees do not pay into Social Security. (I've explained the reasons behind this in many past columns). This proposal would require all newly hired state/local government employees in those jurisdictions to start paying into Social Security. This proposal would have only a modest impact on Social Security's long-range funding, increasing revenues by about 3%.

Here are explanations of their spending reduction proposals.

They propose reducing initial benefits to higher-income workers. How would they do that? Social Security's benefit formula has always been structured so that lower-income workers get a better deal out of the program. In a very simplistic explanation, lower-paid workers could get a Social Security benefit that represents up to 90% of their average lifetime earnings. Most of us get a "payback rate" in the 40% range. For wealthy people, it might be closer to 30%. This proposal would reduce that rate paid to wealthy people, thus slightly lowering their Social Security benefits. This would be a 34% fix to Social Security's long-range deficit.

The current full retirement age for Social Security (the age at which a retiree would get full benefits) is 67. This proposal would raise that age in two-month-per-year increments until it reaches 69. After that, the FRA would be indexed to life expectancy — growing approximately one month every two years. This change alone closes about one-third of Social Security's funding gap.

They also call for increasing the number of years used to calculate benefits from 35 to 40. What does that mean? And how would that decrease future benefits? Currently, Social Security benefits are figured on a person's average earnings using a 35-year base. By increasing that base to 40, you would be adding more years of lower earnings into the mix, thus lowering a person's overall average earnings and therefore lowering his or her Social Security benefit. This change reduces Social Security's long-range deficit by 13%.

Finally, even though most senior citizens don't agree with this, almost all economic experts believe the current formula used to compute annual cost-of-living increases overcompensates Social Security beneficiaries. The so-called "chained formula" is supposed to be a more accurate measure of inflation. It would have the effect of decreasing annual COLAs by about 1%. But that 1% reduction in benefits closes about one-fifth of Social Security's funding gap.

In today's column, I have presented a very brief snapshot of many different Social Security reform proposals by the Committee for a Responsible Federal Budget. If you want to learn more, go to their very excellent website: www.crfb.org.

If you have a Social Security question, Tom Margenau has two books with all the answers. One is called "Social Security — Simple and Smart: 10 Easy-to-Understand Fact Sheets That Will Answer All Your Questions About Social Security." The other is "Social Security: 100 Myths and 100 Facts." You can find the books at Amazon.com or other book outlets. Or you can send him an email at [email protected]. To find out more about Tom Margenau and to read past columns and see features from other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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