| Public pension programs in many countries face dire fiscal futures, and policymakers need new tools beyond economically painful tax hikes and harsh and unpopular benefit cuts. Tax salience---the extent to which taxpayers are aware of the full economic cost of taxes---is such a tool, and it has been shown to be effective in altering behavior in the design of other tax systems. Social Security taxes are more salient when the employee pays a greater share directly, because the full cost of these taxes is generally believed to fall almost entirely on the employee, regardless of the nominal allocation. This thesis demonstrates that allowing employees to see a more full and explicit cost of Social Security by having employees pay a greater percentage of Social Security taxes produces a program that is smaller as a percent of GDP. Because smaller programs are less costly to sustain, this change in policy is advisable for all nations concerned for the financial future of their Social Security programs. |
