The 2004 Medicare and Social Security Trustees Reports

Policy Reports | Health | Social Security

No. 266
Friday, June 04, 2004
by Andrew J. Rettenmaier & Thomas R. Saving, Ph.D.

A Growing Burden Through Time

Figure III - General Revenue Transfers to Social Security and Medicare

In Figure III we present the general revenue transfers to Social Security and Medicare as a percentage of federal income tax receipts (corporate and individual income taxes). We use federal income tax receipts to denominate the transfers because these taxes are the primary source of revenue from which the transfers must be drawn.15

In 2004, Social Security's surplus is expected to equal 5.1 percent of federal income tax receipts while Medicare's combined deficit is expected to equal 8.7 percent of federal income tax receipts. To fully fund legislated benefits, Social Security and Medicare combined will require a transfer equal to 3.6 percent of federal income tax receipts, plus legislated payroll taxes, taxes on Social Security benefits and premiums. By 2010, the draw on federal income tax receipts will increase to 8.6 percent; by 2030 it will exceed 50 percent; by 2050 it will exceed 75 percent; and by 2070 the transfer necessary to fund projected benefits will consume more than all projected federal income tax receipts. Without higher tax rates, all other government programs funded by these taxes will have to be eliminated over the next 67 years!

How high will taxes have to rise, if other federal programs are not cut? By 2010 federal income taxes' share of GDP will have to rise 5 percent to cover Social Security and Medicare transfers and to maintain current funding levels for other programs. By 2020, taxes will have to rise 25 percent; and by 2030 federal income taxes will have to rise almost 50 percent. By 2050 they will have to be 73 percent higher than their current level.

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