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Restructure Social Security: Mathematical Illustration #3 — Increase Social Security Tax Rate From 12.4% to 14.2% Increase Social Security Tax Rate by 1.92 Percentage Points, Immediately & Permanently 12.4% YL +1.92 Percentage Points. Payroll Tax Rate (%) 4, . _ 2009 , . 20108&Beyond . . Note: For mathematical illustrations, we simply calculate how big a revenue increase AND / OR expense decrease each major entitlement program needs to reach financial break-even. These calculations are merely mechanical illustrations and are not meant to portray realistic solutions. Note: 1.92% is the estimated actuarial deficit for Social Security Trust Fund over a 75-year period from 2010 to 2085. Source: Social Security Administration forecast in “The 2010 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and K P Federal Disability Insurance Trust Funds,” 8/10. (@E www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 259 Good News: Mathematical Illustrations to Fix Social Security’s Financial Problems Do Not Seem Drastic In fact, when Social Security was nearing bankruptcy in 1983, a combination of moderate reforms led to 25 consecutive years of operating surpluses. Highlights of 1983 Social Security Reform 1) Raised full retirement age to 67 by 2027 (from 65)* 2) Reduced annual benefits by 5% (via a 6-month delay in cost-of-living adjustment in 1983 & subsequent changes in benefit formulas and tax schemes) . 3) Raised Social Security tax rates by 2.3% (via an advancement in scheduled tax increase). 4) Made Social Security benefits (up to 50%) taxable income. Note: *For people born in 1937 or earlier, full retirement age (with 100% Social Security benefit) remained at 65. For people born after 1960, full retirement age was raised to 67. For people born between 1937 and 1960, the full retirement age progressively increases from 65 to 67. Source: Social Security Administration archive. (@E www.kpcb.com USA Inc. | What Might a Turnaround Expert Consider? 260 HOUSE_OVERSIGHT_020971