Jan. 6, 1997

WASHINGTON -- In response to today's release of recommendations for reform by the Advisory Council on Social Security, the National Association for the Self-Employed (NASE) has endorsed the council's option to allow taxpayers to manage a portion of their Social Security taxes in privately-held retirement accounts.

"Promises made to current retirees must be kept," said NASE President Bennie L. Thayer. "But the Social Security system must be reformed to pay for future generations of retirees. Giving these future retirees some degree of control over their Social Security funds is the only option that will keep the system fiscally sound, while avoiding an unacceptable level of government participation in private enterprise. Most economists agree retirement funds will receive a higher rate of return through diversified investments, including the stock market. This option will increase the amount of money available at retirement and help save the system."

In today's report, members of the council recommended three distinct options for Social Security reform: a plan that would raise Social Security taxes and the age of retirement, as well as lowering benefits; putting a portion of Social Security funds into government-managed and government-owned investments; and giving a portion of Social Security funds to the taxpayers to manage in carefully-regulated personal investments.

"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," stated 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.

"For these reasons, the option to increase taxes and reduce benefits is 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.

"The option to put some retirement funds in government-managed investments is also unworkable," Thayer continued. "Americans have already registered their dissatisfaction with other government-controlled systems, and have made it clear they do not want the federal government expanding its reach over the private sector. When a government-controlled health care system was proposed, taxpayers balked. The same thing will happen if the government starts investing hundreds of billions of dollars in private industry. The government will wind up owning significant parts of hundreds or thousands of companies. The potential for political mischief would be almost limitless.

"When Americans are faced with the choice -- manage your own investments or have the government manage your investments for you -- the overwhelming majority are going to choose to manage for themselves, particularly if those investments are carefully regulated, as the NASE favors," Thayer said.

"Allowing taxpayers to invest and control a portion of their Social Security funds is not only an option that will work, it is the only option that will work," Thayer reiterated. "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.

"Let's save our nation's retirement system and give taxpayers the right to control their own funds," Thayer concluded. "The National Association for the Self-Employed stands ready to assist legislative leaders in making this proposal a reality."

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