Interesting analysis: Agree that current subsidies for retirement savings are both inefficient and unfair. CCSE for many years has advocated for major changes including making retirement subsidies more progressive and providing funds to ALL workers in a universal savings and investment system. Now, the bottom half of the income scale is largely left out.
Redirecting part of the $185-billion annual federal subsidy for retirement plans could help fill Social’s Security’s long-term financing gap, as the authors suggest. However, reducing the subsidy would be fought tooth and nail by lobbyists representing Wall Street and employee benefit plan organizations, which have considerable influence on Capitol Hill.
The idea also faces financial limitations. Social Security trustees project the program’s 75-year actuarial deficit will be about 1.3% of GDP. By way of rough estimate, 1.3% of last year’s GDP (about $26 trillion) equals $388 billion. So, redirecting say $50-$100 billion to Social Security could address only a fraction of its financial shortfall. There’s also the technical question of how tax subsidies could be rechanneled into the Social Security trust fund. The impact on taxpayers of different incomes could vary widely depending on how such a shift in funding were written into statute — and could leave low-wage workers worse off.
CCSE work on Social Security and retirement savings (updated January 2024)