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Politics : A US National Health Care System? -- Ignore unavailable to you. Want to Upgrade?

To: Mary Cluney who wrote (6178)	2/17/2009 7:56:30 PM
From: TimF	2 Recommendations Read Replies (1) \| Respond to of 42652

Yes increasing taxes could cover the shortfall. But increasing taxes is a problem itself. 75% of the shortfall in the projected SS payout in 2032 could be eliminated by lifting the cap on the payroll tax. That's a MASSIVE tax increase. Its a tax increase of 12.4% for everyone above the cap. The rest of the short fall could be eliminated forever if the tax rate were increased by .6 percent. Forever? No, the very long run demographic trends are seriously against it, and even in just what most people would see as the long run (a decade or three) it might not be enough. Also it would be a tax increase on all working people. People who earn very little would be charged more so that you could avoid increasing the retirement age for people who are much wealthier than the entry level workers. And at the high end you would make the tax increase on the working wealthy even bigger, 13.6% (adding an additional .6% tax directly on the employee, and an additional .6% tax nominally on the employer, the the 1.4% tax increase you get from "lifting the cap") ------------------- Two Ways to Eliminate the Payroll Tax Cap. The payroll tax cap could be eliminated in one of two ways: * The payroll tax cap could be eliminated and workers would earn benefits from the new payments; * Or the cap could be eliminated and workers would not accumulate new benefits. Both options would increase Social Security tax collections. The first option would also increase Social Security's cost in later years as higher-wage workers retire and collect larger benefits. The second option would break the link between contributions and benefits, making Social Security more like a welfare program than a social insurance program. Effects of Eliminating the Payroll Tax Cap. A new Social Security Administration report estimates the effect of removing the payroll tax cap. It assumes wages subject to the tax will decline as many workers shift their incomes from covered wages to income sources not covered by the tax like stock options or other benefits. According to author calculations based on the report's findings, removing the cap would: Social Security Annual Deficit/Surplus * Push back the date of Social Security's cash-flow deficit from 2018 until 2025 — giving Social Security only seven additional years of surpluses. * Increase the Treasury bonds deposited in the Trust Fund by $3 trillion, up to $7 trillion at its peak. * Increase Social Security's income by $14 trillion over the next 75 years, reducing Social Security's 75-year debt from $27 trillion to near $14 trillion, but still leaving a significant debt. Eliminating the payroll tax cap immediately affects the 9.2 million Americans who earn more than $87,900, raising their marginal tax rate — the tax paid on each additional dollar of wage income — by 12.4 percent. As a result, earners in the top income tax bracket (35 percent) would pay more than half of each additional dollar they earn in taxes. For example: * A family earning $100,000 would pay $1,500 more per year ($100,000 less $87,900 times the 12.4 percent payroll tax). * A family earning a million dollars a year would face new Social Security taxes of $113,100. Problem: Economic Costs of Raising the Tax Cap. Increasing the marginal tax rate will have adverse economic consequences. The Social Security payroll tax already has an economic cost. According to a recent NCPA study by economists Liqun Liu and Dr. Andrew J. Rettenmaier of the Private Enterprise Research Center at Texas A&M University , the current system encourages people to work fewer hours and produce fewer goods and services, relative to an efficient tax system: * The cost to society as a whole from the Social Security payroll tax alone is 11 cents to 18 cents for every dollar of tax revenue collected. * This loss amounted to $49 billion to $82 billion in 2001, or as much as $804 for every household in America . Increasing the payroll tax will exacerbate these already existing losses. According to the Heritage Foundation's Center for Data Analysis: * Eliminating the cap would constitute the largest tax increase in American history — some $461 billion over the first five years alone. * Over the first 10 years, it would cost the economy nearly $136 billion in lost growth and cause the loss of more than 1.1 million new jobs. ncpa.org

To: Mary Cluney who wrote (6178)	2/17/2009 9:42:59 PM
From: i-node	Read Replies (1) \| Respond to of 42652

75% of the shortfall in the projected SS payout in 2032 could be eliminated by lifting the cap on the payroll tax. The rest of the short fall could be eliminated forever if the tax rate were increased by .6 percent. I'm not sure about these numbers; I don't doubt the first part but I don't think an increase in the tax rate of 0.6% (not sure if you mean 0.3% * 2 or 0.6% * 2) is going to do it. But I don't think you could hand workers that kind of PR tax increase without it smashing the economy. That's a lot of money. If you remove the cap on the PR tax to fix SS, what do you do about Medicare? The only thing, IMO, that might fix these problems is massive economic growth which leads to a glut of income taxes with which these problems can be addressed (out of general revenue). And the likelihood of that happening seems at best extremely remote. Around '83, there was an article in the CPA Journal written by a former chief actuary of the SSA. In that, he wrote that the end game with SS would be a tax revolt. That eventually, the payroll tax required to make ends meet would be so high that essentially all disposable income would be required to feed it. He presented a well-reasoned argument with the data to back it up. Even with the '83 amendments, I think that's what we're facing. It is a very grim picture if you ask me.