30s the rate of return is so much higher in private markets than under Social Security that most would be willing to pay in effect an exit tax for the right to invest payroll tax payments privately. The exit fee is the forfeiture of benefits already accrued. Hence, up to one-third of the current unfunded liability would be eliminated through this transition plan. The funds deposited in private retirement accounts, are funds that can never be easily taken away by the government. A privatized system will increase worker ownership in American businesses and assets.
Privatization is the equivalent of a tax cut for workers.
Currently the Social Security payroll tax is treated by many young workers as simply a tax, not a deferred form of compensation. The increased flow of funds into private capital markets will reduce the cost of capital, and thus increase capital formation, business creation, and ultimately wages and living standards. By sharing the trillions of dollars of economic gains from the higher rate of return from private accounts, Congress could adopt a strategy that would improve the financial status of individual workers and the federal government. This establishes a win-win situation for the government and the worker. Thank you again for the opportunity to testify before this Committee.