The 6.2 Percent Solution: A Plan for Reforming Social Security:
“For the past several years there has been a growing consensus about the need to reform Social Security. Now, however, the debate has advanced to the point where it becomes important to move beyond generalities and provide specific proposals for transforming Social Security to a system of individual accounts. The Cato Project on Social Security Choice, therefore, has developed a proposal to give workers ownership of and control over their retirement funds.
Under this proposal:
* Individuals would be allowed to divert their half (6.2 percentage points) of the payroll tax to individually owned, privately invested accounts. Those who chose to do so would agree to forgo all future accrual of retirement benefits under the traditional Social Security system.
* The remaining 6.2 percentage points of payroll taxes would be used to pay transition costs and to fund disability and survivors’ benefits.
* Workers who chose the individual account option would receive a ‘recognition bond’ based on the accrued value of their lifetimeto- date benefits. Those bonds, redeemable at the worker’s retirement, would be fully tradable in secondary markets.
* Those who wished to remain in the traditional Social Security system would be free to do so, accepting a level of benefits payable with the current level of revenue.”
The full text of the argument Tanner makes for this proposal can be found in
SSP No. 32.