FUTURE BURDEN WILL BE LARGE
April 7, 2005
This year's Social Security and Medicare Trustees reports show Social Security and Medicare will consume an ever-increasing portion of workers' incomes unless the government either breaks its promises to future retirees or makes significant changes to our elderly entitlement system, says Matt Moore, a policy analyst with the National Center for Policy Analysis.
If we assume payroll tax rates rise to meet our funding obligations, the burden on future workers will be large:
- When today's college students reach retirement age in 2050, their children and grandchildren will face a payroll tax rate of about 16.8 percent to pay their Social Security benefits -- a 37 percent increase over today?s rate.
- When Medicare Part A is included, the payroll tax burden will rise to 24.5 percent -- almost one of every four dollars workers will earn that year.
Although the costs for these and other programs are paid from general revenues and state transfers, they can be expressed as a percentage of taxable payroll:
- If the federal and state government shares of Medicare Part B and Part D are added to Social Security and Medicare Part A, the burden on workers will climb to 34.6 percent by 2050 -- more than one in three dollars of taxable payroll.
- When other government-funded health care for the elderly (programs like Medicaid and the Veterans Administration) is added, the total burden will reach 38.9 percent by mid-century.
Thus, almost 40 percent of the wages workers earn in 2050 will be required to pay benefits promised under current law. That's before any bridges or highways are built and before any teachers' or police officers' salaries are paid. If any new entitlement benefits such as more generous prescription drug coverage or long-term care benefits are added, the future burden will be even higher, says Moore.
Source: Matt Moore, "Social Security & Medicare Forecast: 2005," Brief Analysis Nor. 510, National Center for Policy Analysis, April 7, 2005.
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