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112 IRET Congressional Advisory 1 (2001)

handle is hein.taxfoundation/iretcgadv0109 and id is 1 raw text is: Avisr April 5, 2001 No. 112 SOCIAL SECURITY STILL NEEDS FIXING The slightly improved outlook in the 2001 Social Security Trustees Report does not change the fact that the Social Security retirement and disability programs still need fixing. T h a n k s Social Security: Short Ru largely to recent 20 strength in the economy, the Social Security Old Age and Sur- > vivors Insurance (OASI) and E Surplus Disability a.10 Insurance (DI) programs, together referred 5 to as OASDI, are 2001 2016 projected to run Data from The 2001 Annual Social Security Trustees o p e r a t i n g Intermediate Assumptions, year by year projections surpluses - taxes in excess of outlays - through 2016, a year longer than in last year's Report. The deficit spending authority given by the System's trust funds is expected to cover subsequent deficits until 2038, a year longer than in last year's Report. At that point, however, OASDI revenue from payroll taxes and taxing benefits will cover only 73% of benefits, and the system will not be able to make its payments on time. After the baby boom has retired, the annual OASDI shortfalls are projected to grow very large. The deficit will exceed 4.5 percent of taxable payroll in 2038, and reach 6.05 percent of taxable payroll by the end of the 75-year planning period. Tax revenue will cover only 67% of benefits in 2075. Put another way, by 2038, the payroll tax rate would have to be raised by 37% or benefits would have to be cut by 27% to balance the OASDI system. By 2075, the payroll tax rate would have to be raised by 49% or benefits would have to be cut by 33% to balance the OASDI system. Ultimately, either the payroll pluses, Long Run Deficits tax whe o tax will have to be boosted by Ago more than 6 percentage points, Dor benefit growth will have to be trimmed, or some come other tax revenue will have to be diverted to OASDI. (Add in the 7.35 percent r 2075 of payroll deficit ble IV.B1, Combined OASI and 0I Trust Funds, projected for 5, accessed at www.ssa.gov/oactltr/trOlir4b-2.html. M e d i c a r e ' s Hospital Insur- ance program in 2075, and the payroll tax increase would have to be 13.4 percentage points.) It is not true, as some may claim, that a hike in the payroll tax of less than 2 percentage points Institute for Research on the Economics of Taxation n Surl Report, Tab for 2001-207 IRET is a non-profit, tax exempt 501(c)(3) economic policy research and educational organization devoted to intorming the public about policies that will promote economic growth and efficient operation of the free market economy. 1730 K Street, N.W., Suite 910, Washington, D.C. 20006 Voice 202-463-1400 * Fax 202-463-6199 0 Internet www.iret.org

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