Currently we have a bizarre tax system where workers and employers both contribute equally to payroll taxes to pay for social security and medicare. On its own, this isn't necessarily a bad thing. These are programs that do a lot of good and provide for people in retirement. Here's the problem: these payroll taxes do not apply to those who make a living off of investments, and they also do not apply to those who make more than a certain amount of money. Here's where it gets even worse, if you are self-employed, you are effectively playing twice the tax, since you are the employer and employee.
What we've set up is a tax scheme that effectively discourages labor, discourages entrepreneurship, and encourages only investment. On top of that, it's not solvent. So we need to change it. Here's my proposal?
Let's stop treating this like a savings account and treat it like it actually is: social welfare. Make the tax apply to high income earners, not just middle income earners. Make it apply not just to wage income, but to all sources of income. This does mean that yes, now the rich can collect social security, but we already a maximum benefit worked into the system, so on net we'll be collecting much more revenue.
This fix will treat all sources of income equally and fix the budget issues.
Thoughts?