However, since that time, the payroll tax has been increased 13 times. Even adjusted for inflation, the maximum tax has increased nearly 900 percent. In addition to the hardship for individuals, raising Social Security taxes will also slow economic growth and cost jobs. According to the Congressional Budget Office, payroll tax increases between 1979 and 1982, for example, resulted in a permanent loss of 500,000 jobs. If taxes are not raised, benefits will have to be reduced significantly.
Most current estimates suggest that promised benefits are underfunded by at least one third.
However, any substantial reduction in Social Security benefits will cause severe problems for those elderly Americans who rely on the program. Social Security currently accounts for approximately half of all retirement benefits. More than half of the elderly receive no private pension, and more than one-third have no income from assets. But that only tells part of the story. As the table below shows, the poorest 20 percent of the elderly depend on Social Security for 81 percent of their income.