There is a debate about whether to save on Social Security by increasing taxes or cutting benefits. matt iglesias proposes a combination of two approaches.
Let's consider two methods, starting with an all-tax approach.
1. Raise payroll taxes by 1% from 15.3% to 16.3% and add $1,000 in taxes on wealthy seniors.
Next, consider a combination of tax increases and benefit cuts.
2. Increase payroll taxes by 1% from 15.3% to 16.3% and reduce tax rates. social security The benefit for wealthy seniors is $1,000.
See the difference? Neither do I.
Iglesias is essentially proposing to address the problem once and for all by increasing taxes. (Not that it's a bad idea. I just want to clarify the issues involved. And I might add that Iglesias probably understands this, since he doesn't claim it's not an implicit tax increase.) Masu.)
A useful way to approach the problem of government taxes and spending is to consider how different proposals would affect the government. implicit marginal tax rate both for current and future consumption. Payroll tax and VAT tax current and future consumption at the same rate. Taxing capital income effectively taxes future consumption at a higher rate than current consumption.May also be implicitly different marginal tax rate Low and high levels of consumption (such as „inventive step“). Poor people often pay relatively low taxes in absolute terms, but face high IMTRs because their benefits phase out quickly once they start working.
There is a PS. caveat Social Security could run out of funding within nine years, and benefits could be automatically cut.
If policymakers don't take steps to protect the program over the next decade, a Social Security funding crisis is on the horizon, threatening to cut annual benefits by 23% for all 70 million beneficiaries. A new report claims there is.
of analysis According to US Budget Watch 2024, a project of the public policy group the Committee for a Responsible Federal Budget, if reserves in the main trust fund used to finance Social Security are depleted by 2033, the average new An immediate reduction of $17,400 for a working couple who retired in . The single-earner couple loses her $13,100.
I am currently on Social Security and would benefit personally if it were to happen. That's because the alternative (higher taxes and sharp cuts in benefits for the „rich“, i.e. former frugal teachers like me) hurts me even more. To be clear, this outcome is highly unlikely, and Congress will almost certainly find some less politically harmful fix to the program. By the way, „borrowing money“ is not the answer, even if the additional debt is not repaid. Just paying off the additional debt would require much higher taxes. In any case, tax increases are just around the corner. I held this view even before the Republican Party turned into a populist big government party. I'm almost certain now.