January 1997

Small businesses favor private account option for Social Security reform

WASHINGTON -- By a large margin, small-business owners favor Social Security reform that would allow for private investing of a portion of Social Security funds, according to a poll commissioned by the National Association for the Self-Employed (NASE). Sixty-five percent of respondents preferred the self-directed account option, with 42 percent strongly supporting such a plan.

Last week, when the Advisory Council on Social Security released its recommendations, the NASE endorsed the council's option to allow taxpayers to manage a portion of their Social Security taxes in privately-held retirement accounts.

"Small business has much to lose if we are too timid in Social Security reform," said NASE President Bennie L. Thayer. "With less money in private pensions, small-business owners are more dependent on the system's future viability. Their endorsement of the private investment option is a strong signal that this option must be fully explored.

"Self-employed individuals have a very high stake in this issue because we pay more in direct Social Security taxes than any other type of worker," added Thayer. "The self-employed are 'triple-taxed,' paying both the employer's and employee's share, and then -- like other Americans -- paying taxes on the employee share, which is not deductible from federal income tax." The current Social Security rate for the self-employed is 15.3 percent, which must be paid from gross income -- before expenses, salaries, investments and even other taxes are paid.

Since the Advisory Council on Social Security released its three-part recommendation last week, Thayer noted a high degree of resistance toward self-directed accounts, with many legislative leaders and interest groups seeming to prefer the traditional Washington approach -- raising taxes and lowering benefits.

"Simply increasing taxes and reducing benefits would be completely unacceptable for self-employed individuals," Thayer continued. "Workers who run their own businesses would be hit three times as hard by this type of reform. Furthermore, most taxpayers -- even those who work for companies -- no longer get out from Social Security what they put into it. This plan would make those inequities even more severe.

"Congressional leaders need to listen to the voice of small business, and look at Americans' proven track record on investing their own retirement savings," Thayer said. "Americans have already proven -- through their enormous participation in mutual funds, 401Ks, Keough accounts, IRAs and other plans -- they are ready, willing and able to make these investments on their own, and these investments have enjoyed a much higher rate of return than other types of accounts.

"While promises must be kept to current retirees, in order to have anything left for our grandchildren, we need to make these reforms now," Thayer concluded. "Small businesses -- the engine that runs our nation's economy -- stand ready and willing to become responsible for investing a portion of their Social Security funds. We've trusted these entrepreneurs with America's financial present. Let's trust them with the future as well."

NASE's survey of 500 small-business owners nationwide was conducted Jan. 7-9, 1997, by the Small Business Research Institute, a nonpartisan survey research firm based in Washington. Results have a margin of error of +/- 4.4 percent. "Small business," for the purpose of this survey, refers to business enterprises with fewer than 10 employees.

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