The chairman of the House tax-writing committee said Sunday that President Bush's drive to overhaul Social Security should lead to consideration of a value added tax or other ways to fund the entitlement program.
Congress also should consider basing benefits on such factors as race, sex and the job a retiree once held, said Rep. Bill Thomas, R-Calif.
"The way we fund the Social Security system, I think, needs to be examined. What we fund it for, chronic or long-term care, has not been addressed, and that's one of seniors' major needs," he said in a broadcast interview.
Thomas dismissed the idea of raising the limit on payroll tax deductions from the current $90,000, which would make wealthier people pay more into the system. "Why even bother looking at the payroll tax? That was a solution in the 1940s and the 1950s," he said, when the rate was 2 percent of income.
"Now that it's 12 percent, we actually are dealing with a job-killer. The higher the payroll tax, the fewer people are hired. ... Let's find revenue that doesn't continue to kill jobs but also meets our needs," said Thomas, chairman of the House Ways and Means Committee.
Thomas mentioned the valued added tax, a kind of consumption tax. It is, in effect, a sales tax imposed at each level of production of goods and services.
"I don't think anything should be above being looked at," Thomas said.
He noted that other countries have taxes that are added to U.S. exports, but then subtract such taxes from their goods sent abroad.
"The United States is the world's largest importer and the world's largest exporter, and our tax system is out of sync with the rest of the world. We pay their social costs; they don't pay ours. That at least needs to be examined," Thomas said.
Bush says the aging of the baby boom generation has put Social Security in a crisis that can best be dealt with by giving younger workers the chance to invest for themselves in personal investment accounts.
Democrats and some Republicans have criticized the idea as too expensive.
Thomas has found fault with Bush's idea, although on Sunday the lawmaker credited the president with making it possible to talk about changes to Social Security.
The last major changes to the system encouraged optional increases in retirement age. That was intended to lower costs by reducing the number of years the average retiree received benefits.
"To move from 65 to 68, which we did in 1983, was a benefit cut, but it also creates hardships based upon the occupation that you have, and it creates inequities on who you are and how long you live," Thomas said.
"You could just as easily have a discussion about occupations, as to when would be a fair or an unfair time to retire," he said.
"We also need to examine, frankly, ... the question of race, in terms of how many years of retirement do you get based upon your race. And you ought not to just leave gender off the table, because that would be a factor," Thomas said.
Established at the depth of the Great Depression, Social Security has grown from a relatively modest way of helping older people and the unemployed. It now is the largest single item in the federal budget, accounting for about $500 billion annually with guaranteed yearly cost-of-living increases.
Analyses show that in 2018, the program will start paying out more in benefits than it collects in payroll taxes. The money coming into Social Security will cover only about 73 percent of benefits owed by 2042, unless changes are made before then.