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.
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:
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- 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. - The payroll tax that funds Social Security is already a heavy burden.
