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1 Arthur P. Hall, A Primer on Social Security Reform 1 (1996)

handle is hein.taxfoundation/srggxz0001 and id is 1 raw text is: TAX FOUNDATION November 1996, No. 66 A Primer on Social Security Reform The Social Security system once again faces financial trouble, despite the fact that payroll tax increases were enacted in 1983 to keep the system solvent. This time around, the Social Security Administration projects that the system will become bankrupt in the year 2031. Yet, the financial implications of this bankruptcy will confront taxpayers 16 years sooner, in the year 2015. Figure 1 tells one-half of the story. It pro- vides a snapshot of the fiscal history and the projected fiscal future of the Social Security system (Old-Age and Survivors Insurance only). The historical and projected growth path of expenditures and tax collections are expressed as a percentage of taxable payroll. The tax collections consist of dedicated pay- roll taxes and, since 1985, the revenue dedi- cated to the Social Security Trust Fund derived from the income taxation of Social Security benefits. As Figure 1 clearly reveals, a major mismatch between Social Security expendi- tures and tax collections confronts U.S. taxpay- ers and Social Security recipients. Figure I OASI lax Collections v. OIS! Expenditures (as a Percent of Taxable Payroll) 16.0% ............... - Tax- 14.0%- Expenditure 12.0% 10.0% I 6m Social Security 8.0%- Social . Bankruptcy (2031) Security in the Red- I 6.0% Federal Deficit Explodes 4.0% (2015) 2.0O% 0 .0 % . .. . . . . . . . . . . . . . . . . . . .. . .... . .. . . . r_ C\i Csi r- C\ N_ N\ N \1N r- gI r- fl N N , CO) u m ) (0 (ON N 00 00 0) 0) 0 (0 w 0 D 0 0) 0 0)0 0)0 0)0 00) F))0 0 0 0 0 0 0 0 0 0 Note: Historical data stops at 1995. Intermediate projection assumptions. *Includes dedicated payroll taxes and income taxation of Social Security benefits. The income taxation of Social Security benefits began in 1985 and accounts for about 2 percent of OASI tax revenue, increasing to about 5 percent in 2050. Source: Social Security Administration. By Arthur P. Hall, Ph.D. Senior Economist Tax Foundation :)It

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