Re: a tax proposal.
I think there's a tax reduction plan that would solve a lot of problems.
But first some data.
The projected surplus over the next ten years actually comes from the Entitlement funds for Social Security and Postal Workers. The income from worker and employer entitlement contributions has exceeded outgo for many years.
The Government looks at the budget three ways. On-Budget, (includes all programs except Social Security and postal service), Off-budget, (includes only the income and outgo of Social Security trust funds and the postal service), and Unified Budget, (Includes all programs of the government, including Social Security and postal service).
It's the Unified budget that shows a surplus for the General Fund. On budget has shown a deficit for years, and it's projected the cumulative On Budget deficit will approach about 1 Trillion dollars in the next ten years. (Concord Coalition).
At the same time Off-Budget, (entitlement funds), shows growth of about 1.6 Trillion over the next ten years. Makes you think that SS is in good shape, right?
Problem is, the Government borrows the SS excesses through issue of special Government Bond's. SS currently holds about 1 Trillion in U.S. debt, and that is estimated to grow to about 2.6 Trillion over the period. Also, the Interest payments made on that debt is in the form of IOU's through issuance of more bonds.
From the Concord Coalition"
While the trust funds have an important role in monitoring the finances of the program and maintaining its fiscal discipline, they are basically accounting devices. The federal securities they hold are not assets for the government. When an individual buys a government bond, he or she has established a claim against the government. When the government issues a bond to one of its own accounts, it hasn't purchased anything or established a claim against some other entity or person. It is simply creating a form of IOU from one of its accounts to another. It certainly establishes legal claims against the government for the Social Security system (i.e., it is a legal form of indebtedness of the government and does count as part of the federal debt; see Table 3 on the next page), but the system is part of the government. Those claims are not resources the government has at its disposal to pay for future Social Security claims. Simply put, the trust funds do not reflect an independent store of money for the program or the government, and taking Social Security "off budget" did not change this.
The borrowed money from the Entitlement funds goes into the General Fund of the U.S. Treasury. It's used for non-entitlement purposes.
When the time comes that entitlement outgo exceeds contributions, the SS will want to start redeeming those bonds. The Government will have to either, 1). Increase taxes, 2). reduce benefits or 3). extend the age when workers become eligible.
Currently workers are taxed on up to $72,000 of income through FICA contributions.
I doubt if the government is planning to reduce those contributions, even though they are running a surplus in S.S.
But why not? Considering the surplus comes from worker and employer contributions to S.S., if the Government reduced contributions such that income equaled outgo both worker and employer would benefit fairly. And coincidently, it represents about a 1.6 trillion tax reduction over the next ten years.
But it would also mean that the Government would have to operate within budget, (Unified or otherwise), and I suspect that's why this wouldn't be considered.
JMO's |
