Payroll Taxes -- Up, Up And Away
May 18, 2001
Based on the Social Security Trustees' 2001 Report, analysts say the tax rates needed to support Social Security, Medicare and other health care benefits for the elderly will grow continuously -- as far as the eye can see.
- Today the payroll tax rate for Social Security retirement and disability insurance is 12.4 percent.
- By the year 2030, when all the baby boomers will have reached retirement age, the government will need 16.6 percent of workers' incomes to pay Social Security benefits.
- Add Medicare Part A (primarily hospital bills) and the government's share of Medicare Part B (primarily physicians' fees) and the burden will climb to 24.6 percent.
- When other elderly health care expenses like Medicaid and the Veterans Administration are included, the total bill rises to 27.9 percent of payroll.
When today's 18-year-olds become eligible for retirement in 2050, their children and grandchildren will face a payroll tax of 17 percent to pay Social Security benefits. Include Medicare Part A and B and other health care benefits and the payroll tax will have to be 32.8 percent. That's almost a third of future workers' incomes just to pay benefits already included in current law.
Source: Matt Moore (policy analyst, NCPA), "The Nightmare in Our Future - 2001 Update," Brief Analysis No. 361, May 18, 2001, National Center for Policy Analysis.
Browse more articles on Tax and Spending Issues