FairTax Overview
4) The FairTax ensures Social Security’s soundness by funding the Social Security program with a
progressive, broad-based national retail sales tax, rather than the current regressive, narrow
payroll tax.
Currently, the Social Security system is funded by a payroll tax from workers, a very regressive tax that
will only have to go up as more and more baby boomers retire and fewer and fewer workers fund
seniors’ retirement. The increased longevity of Americans only further compounds the problem. The
chart below shows that when the program was enacted there were 41.9 workers to support one retiree;
now there are only 2.9.
The projected Social Security Trust Fund assets increase through 2020, but they begin to decline in
2021, and become exhausted and unable to pay scheduled benefits in full on a timely basis in 2033. The
official actuarial analysis projected that immediately increasing both the employee and employer payroll
tax rates from 6.2 to 7.5 percent, a rate increase of 21 percent in order to keep the trust fund in balance
for 75 years56.
How Many Workers to Support 1 Retiree?
45.0
41.9
40.0
35.0
30.0
25.0
20.0
16.5
15.0
10.0
5.1
3.7
3.2
3.4
3.4
2.9
1960
1970
1980
1990
2000
2010
5.0
0.0
1945
1950
The FairTax funds Social Security with a progressive, national retail sales tax, supported by the
spending of every consumer in America, even teenagers, tourists, illegal immigrants, and the army of
18-million people who (illegally) do not file and pay today. FairTax revenues grow with the economy.
56
The actuarial study uses a 75 year planning period to determine long term fund solvency. Board of Trustees of the Federal
Old-Age and Survivors Insurance and Disability Insurance [OASDI] Trust Funds. 2012. “2012 Annual Report of the Board
of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds.” Washington, DC.
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