The Urban Institute has released a new paper by Barbara A. Butrica, Karen E. Smith, and Eric J. Toder analyzing how four potential changes to tax law would affect retirement income. The changes simulated are:
- a) reducing contribution limits on 401(k) plans;
- b) extend tax cuts for capital gains and dividend income;
- c) index thresholds for income taxation of Social Security benefits; and
- d) Eliminate Social Security thresholds and include 85% of Social Security benefits in adjusted gross income
The authors conclude that indexing thresholds for income taxation of Social Security benefits would have the largest effects on the middle class. These individuals do not generally reach 401(k) contribution limits, so lowering them would have a smaller effect than on higher earning workers. Likewise, the middle class tends to have lower asset income relative to other income, so extending cuts in capital gains and dividend taxes would have a smaller effect. Eliminating Social Security tax thresholds would have the largest negative effect on middle earners.
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4 comments:
Found your blog from Williams' . Social security was raided in 1964 by the Democrats.
Table VI.A4.-Historical Operations of the Combined OASI and DI Trust Funds,
Calendar Years 1957-2006 Ah yes the great raid of 1964. The myth that will not die.
The entire Trust Fund in 1964 was $21.2 billion dollars up $500 million from 1963 but actually down $1.8 billion from 1957. And 1965 actually showed the Trust Fund shrinking by $1.3 billion. In fact over the course of Johnson's Presidency the entire Social Security surplus was only $13.5 billion net. We did not finance Vietnam or the Great Society with $2.7 billion per year. Nobody stole anything, for the most part there wasn't much to steal.
BTW you can let all President's from Nixon to Bush 1 off the hook here. The Trustees are mandated with keeping 1 year of reserves. Any year were the Trust Fund Ratio falls below 100 (=1 year) is a year where by definition nobody is stealing anything. The Trust Fund Ratio slipped below 100 in 1971 and stayed there until 1993. So we can dismiss the parallel Left myth that Reagan looted Social Security to pay for Star Wars. Never happened.
These myths persist because people by and large never consult the actual numbers. When you do you realize that you can't loot what isn't there.
These may be better comments for a different post. But in any case, Bruce said:
"BTW you can let all President's from Nixon to Bush 1 off the hook here. The Trustees are mandated with keeping 1 year of reserves. Any year were the Trust Fund Ratio falls below 100 (=1 year) is a year where by definition nobody is stealing anything."
I think this misunderstands the issue, which is not of "stealing" but of how the non-Social Security budget reacts to the presence of Social Security surpluses. If the rest of the budget doesn't react (i.e., doesn't spend more or tax less) then the overall budget improves and national saving rises. Whether the TF ratio is above or below 100% has nothing to do with it. Likewise, if the on-budget DOES react by spending more/taxing less, then it's fair to say that the Social Security surplus has been "spent." Again, whether the TF ratio is above or below 100% just doesn't matter for this question. The program is required to maintain a TF ratio above 100% for solvency purposes, but this is a different matter. The first question is an economic one, the second a legal one.
Biggs the notion that actual 60's budgeting was fundamentally moved by Johnson's decision to adopt a Unified Budget seems to me to be simple fantasy. In context the numbers of SS are not such as to have the dire implications often asserted by the looting narrative.
In context there wasn't much to react to, these are not big dollar figures and in short order turned negative. I don't credit Reagan with much but in fairness he inherited a really shitty Social Security outlook and didn't accept the Cato solution with results visible in the Fall 1983 issue of Cato Journal: ' Social Security: Continuing Crisis or Real Reform' I read through it, did you? Its called ' Due Diligence' The sense of bitterness that pervades Cato's reaction to Reagan's decision to not end but instead mend
SS is palpable. Well tough.
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