Press Release
Sunday, February 28, 1999

WASHINGTON--Concord Coalition Board Member Martha Phillips strongly urged Congress and the White House to avoid relying exclusively on tax increases to close the gap between future Social Security benefits and expected revenues in testimony before the Senate Special Committee on Aging today.

"Reduced to its fundamentals, the problem ahead for Social Security is that the growing real benefits promised under current law cannot be financed by the revenue structure that is now in place," testified Phillips. "Closing the gap by relying solely on taxes would constitute an impossibly burdensome tax increase, would have negative labor force consequences, would be generationally unfair, and would use resources that might be needed for other purposes in the future, including dealing with intractable Medicare problems."

In her testimony, Phillips explained that:


  • The payroll tax that funds Social Security is already a heavy burden. Payroll taxes already are the largest tax owed by three-quarters of American workers (counting the employer's share but not the 2.9 percent Medicare tax). We seldom focus on the fact that many of those workers who are deemed not to have enough income to owe federal income taxes nevertheless must contribute 15.3 percent of their earnings in payroll taxes.


  • Raising payroll taxes puts the burden of saving Social Security squarely on the shoulders of those who are working today and the generations that follow them. Retirement benefits paid to today's beneficiaries provide an excellent return on the taxes they paid in during their working lives. In contrast, young people entering the workforce today can look forward to meager returns on their payroll taxes, and many will actually receive a negative rate of return.


  • Medicare challenges still loom. The Social Security program does not exist in a vacuum. Making Social Security sustainable would not be nearly so difficult if it were not for the even greater dilemma of addressing projected Medicare shortfalls. Conventional cost-cutting measures will not suffice to keep Medicare shortfalls in check. A strong possibility exists that additional revenues will be needed to finance Medicare in the future, particularly if Congress decides to broaden Medicare coverage to include prescriptions and other services. Revenues dedicated to making Social Security sustainable cannot also be used to shore up Medicare.