Social Security is the single largest government program. In 2007, the program cost $585 billion and provided benefits for roughly 50 million retirees, dependents, survivors, and disabled workers. It is financed primarily through the payroll tax -- a 12.4 percent tax on wages up to $102,000. The tax is split equally between employees and employers. The remaining revenues come mainly from the taxation of Social Security benefits for wealthier recipients.

Next year, the program’s surpluses will begin to decline precipitously. The Social Security Trustees have repeatedly warned that the program is on an unsustainable path and that the system will begin running cash deficits in 2017. The trust funds have claims on government revenues sufficient to pay promised benefits until 2041, but redeeming the trust fund assets will require the government to raise taxes, cut government spending, or borrow. To finance promised benefits, payroll taxes would have to be increased from 12.4 percent today to around 16 percent in 2041 and increase gradually after that. Alternatively, benefits could be cut across the board by roughly 22 percent by 2041, and modestly cut on regular basis thereafter.

Changes will have to be made to Social Security. Ignoring the problem and pushing the necessary changes to a later date — as has been done in past years — only makes them more painful. Although there are hundreds of proposals to address Social Security’s long-term gap, most fall into two basic categories: cutting benefits or raising taxes.

The following table synopsizes the proposals and positions of both presidential candidates on reforming Social Security. For the full text of this paper, please see the PDF copy attached below.