SS tax increase ?

[imoldernu]

Apologies if this has been discussed...
Apparently the CBO has suggested an immediate increase in Social Security taxes... 3.4%... much more than what had been discussed before. The change comes from estimating a longer lifespan for SS beneficiaries Was this a news item? The release date was Sept 24.
Anyway, more info here:
CBO | Why CBO Changed Its Approach to Projecting Mortality

Over the next 75 years, if current law remained in place, the Social Security program’s actuarial shortfall would be 3.4 percent of taxable payroll, CBO estimates—as detailed in The 2013 Long-Term Budget Outlook released last week. In other words, to bring the program into actuarial balance through 2087, given CBO’s projections, payroll taxes could be increased immediately and permanently by 3.4 percent of taxable payroll, scheduled benefits could be reduced by an equivalent amount, or some combination of tax increases and spending reductions of equal present value could be used. That shortfall is substantially greater than the 1.9 percent of taxable payroll that CBO estimated last year.

 

[2B]

We can play "what ifs" on most entitlement programs. SS is probably the most financially secure of the bunch if you believe the "bonds" held in the trust fund are worth anything.

 

[growing_older]

It isn't news that SS needs more income to make the books balance, but this seems to be the first time that they are discussing raising rates (and immediately at that) compared to the often discussed plan to raise the limits on what income is subject to social security tax.

 

[2B]

It isn't news that SS needs more income to make the books balance, but this seems to be the first time that they are discussing raising rates (and immediately at that) compared to the often discussed plan to raise the limits on what income is subject to social security tax.

The problem with raising the income limit is that the SS benefit is currently based on the maximum contribution limit. Raising this theoretically raises the payout or, if not changed, it becomes a [-]thinly veiled[/-] pure tax increase disguised as an increase in the FICA. That would probably face more resistance but I suspect any rate increase will be a fight.

For years the SS revenue was always included in the spending but were dropped from the national debt under Clinton (I think). Now the SS trust fund represents "bonds" that will have to be repaid out of revenues. Raising FICA or other taxes meet the same end.

 

[M Paquette]

This is not surprising. The last time that a Social Security adjustment was worked out to cover future actuarial projections was over 30 years ago. They were pretty sure that no new adjustments would be needed until 2016. The CBO is just doing their job exploring a variety of paths so that Congress may make informed decisions. (This may be the most frustrating job in the world.)

It's not a disaster or impending crisis. It's just about time for another mid-course correction. Please pay no attention to the talking heads trying to raise their ratings.

 

[Independent]

Apologies if this has been discussed...
Apparently the CBO has suggested an immediate increase in Social Security taxes... 3.4%... much more than what had been discussed before. The change comes from estimating a longer lifespan for SS beneficiaries Was this a news item? The release date was Sept 24.
Anyway, more info here:
CBO | Why CBO Changed Its Approach to Projecting Mortality

I don't see a "suggestion" here. Both the CBO and the SS actuaries do long term projections of the SS balance. AFAIK, they both have routinely converted the imbalance into level percent of covered wages. This is a lot easier to grasp than X trillion dollars.

It doesn't mean they are taking a stand on whether it's better to raise taxes or cut benefits, or the details of how either should be done.

 

[ziggy29]

SS is on a collision course with reality if nothing changes in the the next 10 years or so. But in reality, a handful of small tweaks can probably bring it back in to balance, and gradually introduced so that a "line in the sand" doesn't mean you are horribly screwed for being born one day later than someone else.

SS needs some fixes, but IMO none of them are insurmountable.

As I see it, the ability of Washington to agree on a "grand bargain" in SS is a much greater concern than whether or not a series of tinkering around the edges is feasible.

 

[Independent]

The problem with raising the income limit is that the SS benefit is currently based on the maximum contribution limit. Raising this theoretically raises the payout or, if not changed, it becomes a [-]thinly veiled[/-] pure tax increase disguised as an increase in the FICA. That would probably face more resistance but I suspect any rate increase will be a fight.

For years the SS revenue was always included in the spending but were dropped from the national debt under Clinton (I think). Now the SS trust fund represents "bonds" that will have to be repaid out of revenues. Raising FICA or other taxes meet the same end.

Eliminating the maximum and providing credit for the extra taxed income narrows the gap. That's due to the high band 15% benefit factor. The SS actuaries post their numbers here: Long Range Solvency Provisions
See E2.1 and E2.2.

Both SS taxes and benefits have been included in calcultions of the annual federal deficit/surplus since [sometime after SS started running a significant annual surplus following the 1980s amendments].

However, calculations of the accumulated federal debt usually include the iability for the money the General Fund "borrowed" from SS, with no offsetting asset from the SS perspective.

 

[MasterBlaster]

For years the SS revenue was always included in the spending but were dropped from the national debt under Clinton (I think). Now the SS trust fund represents "bonds" that will have to be repaid out of revenues. Raising FICA or other taxes meet the same end.

You can thank Lyndon Johnson for putting SS under thr "Unified" budget. Then with the Greenspan commision "fixes" we were to build up a so called trust fund to pay for the boomers retirement.

However, That unified budget accounting and the "trust fund" cash flow then allowed for some creative massive extra spending. The bills are just starting to come due now.

 

[frayne]

We can play "what ifs" on most entitlement programs. SS is probably the most financially secure of the bunch if you believe the "bonds" held in the trust fund are worth anything.

 

[Independent]

Correcting earlier post:

Eliminating the maximum and providing credit for the extra taxed income narrows the gap. That's due to the high band 15% benefit factor. The SS actuaries post their numbers here: Long Range Solvency Provisions
See E2.1 and E2.2.

Both SS taxes and benefits have been included in calcultions of the annual federal deficit/surplus [starting in 1968, but pretty complicated process, see http://www.ssa.gov/history/BudgetTreatment.html].

However, calculations of the accumulated federal debt usually include the iability for the money the General Fund "borrowed" from SS, with no offsetting asset from the SS perspective.