JOHN KERRY WANTS YOUR SOCIAL SECURITY BENEFIT!
August 17, 2004
Although John Kerry has not laid out a plan to reform Social Security or to solve its fiscal problems, he has said he would consider "making sure that high-income beneficiaries don't get more out than they pay in" as taxes during their working years.
In practice, the Kerry plan would mean cutting Social Security benefits by about 80 percent for those whose benefits are reduced, says Martin Feldstein, chairman of the Council of Economic Advisers under President Reagan.
- Anyone who turns 65 this year and who has always paid the maximum Social Security tax would have paid total taxes from age 21 to 65 of $82,066; such a new retiree would now be entitled to annual benefits of about $22,000, an amount that would rise with the price level.
- With an expected remaining life of 17 years and a 2 percent inflation rate, this retiree would receive $440,000 by age 82; to limit the expected benefit to the $82,066 paid in lifetime taxes, the Kerry plan would require cutting the benefit by 80 percent, thus lowering the annual benefit from $22,000 to only $4,100.
Kerry has not said which "high income" retirees would be hit by these drastic cuts. If it is limited to the same top 3 percent of income earners as the $200,000-plus group that Kerry has targeted for an income tax increase, the number of individuals and the cut in total Social Security outlays would be very small. Even the 80 percent cut in benefits for that group would reduce total Social Security outlays by less than 5 percent. A benefit cut targeted in that way would be more of a gesture against high earners than a serious attempt to reduce Social Security's fiscal shortfall, says Feldstein.
Source: Martin Feldstein, "Fact vs. Fancy: The Skinny On Social Security," Wall Street Journal, August 17, 2004.
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