[ancient_geezer]

The proposed SS reform under this study looks like this:

Combining Tax Reform and Social Security Reform
http://www.ncpa.org/pub/st/st275/st275g.html

"This proposal consists of four elements: (1) replace federal personal and corporate income taxes with a 17 percent flat-rate consumption tax, where the rate is measured on a tax-inclusive basis; (2) use 3 percentage points of the new tax to match contributions of 1 percent each by employees and their employers to create 5 percent personal retirement accounts designed to eventually replace the current pay-as-you-go Social Security system; (3) rebate the 17 percent consumption tax conditionally to the bottom one-third of the income distribution to those with health insurance and retirement accounts, pensions or Individual Development Accounts; and (4) apply the Social Security (FICA) payroll tax to all wage income.

Social Security Reform. In structuring a privatization proposal, we examined the plan of Saving and Rettenmaier,³⁹ who propose 5 percent individual retirement accounts funded by 1 percent payroll contributions from employees, matched by a 1 percent contribution from employers and 3 percent from the government. The government’s contribution could consist of a diversion of payroll taxes or payments from general revenue. In either case, the transition is made possible in our proposal by the new consumption tax.

In the Saving/Rettenmaier proposal, the option to establish a personal retirement account (PRA) is voluntary and lower-income workers get larger government matches in order to replicate the progressivity of the current system. As the PRA balances grow over time, government-paid benefits are reduced. Over the course of one’s work life, a 5 percent account should be sufficient to replace currently scheduled Social Security benefits for an average-income worker.

In this analysis we assume that all workers participate in the private system and all retirees remain in the current system. We also assume that all workers contribute the same percent of wages (5 percent) regardless of income. "

[KarlInOhio]

It looks like the 3% is the payment by the government into a private retirement account, on top of 1% from the employee and 1% by the employer. The SS tax would be applied to all wages (no more $90k cap) [paragraph 1, point 4].

So the net tax for someone in the top rate would go from a marginal rate of 37.9% (35% income + 2.9% medicare) to 29.7% (15.3% SS/medicare + 17% of the amount left after SS).