FNC
Leigh Gallagher
On the surface, raising the retirement age has a lot of appeal because it's based on a concept that is straightforward, logical and very easily digestible: People are living longer, and therefore, the thinking goes, can reasonably be expected to work longer. And indeed they are: When FDR signed the Social Security Act in 1935, the average life expectancy was 59.9 for men, 63.9 for women. Today, life expectancy at birth is 74.8 for men and is 80.1 for women.

But this oversimplified logic has a fatal flaw in that it is highly discriminatory by occupation. If a hard-working, white-collar contributor to our service economy — a lawyer, doctor, or accountant, say — works longer, it means spending a few more years in a desk job. That's easy to do, and in fact it's a very appealing option for some (it's why we see Type A, high-octane octogenarians like Kirk Kerkorian and Maurice Greenberg toiling away through their 80s). But for the nation's manual laborers for whom each day is physically exhausting, it's quite a different story. Raising the retirement age punishes the poor, while sparing white-collar workers from any real pain.

Additionally, there's a difference between living longer and living healthier. Just because we live longer doesn't mean our ability to work, in whatever capacity, gets extended along with it.

A better solution: Eliminate the existing $90,000 cap on payroll taxes. The wealthy shouldn't get any more of a break than the middle class, which already pays taxes on 100 percent of their earnings. Eliminating the cap while leaving benefits unchanged would fill in 116 percent of the gap, according to estimates by Social Security Administration actuaries, more than enough to make the system solvent for 75 years. Raise benefits to match those increased taxes and it still fills 93 percent of the gap. Raising the retirement age to 70, by comparison, fills in a meager 36 percent.

Eliminating the payroll tax is not only more financially sound, it's a far more equitable solution. It's fair and balanced direction this country could stand to move in.

This weekend our Business Block has more on solving the Social Security dilemma. Tune in Saturday 10am — noon ET.

Leigh Gallagher is a senior writer for SmartMoney magazine and a regular on "Cavuto on Business".