Gore's Social Security "Reform" (Retirement Savings Plus) Would Require Tax Hike
September 11, 2000
Economists who have analyzed presidential candidate Al Gore's retirement proposals conclude they would necessitate a total tax increase of roughly 40 percent. Moreover, his Retirement Savings Plus plan would fail to benefit lower-income families.
Retirement Savings Plus would have the government subsidize personal savings for retirement, college or a house purchase for anybody who earns less than $100,000 a year.
- Lower-income people could contribute up to $500 which the government would top up to $2,000 with a $1,500 match; middle-income people could set aside $1,000 with the government kicking in another $1,000; and those in upper income brackets could stash away $1,500 and get a subsidy of 33 cents on the dollar.
- Hoover Institution economist John Cogan, using Internal Revenue Service data, estimates the plan would cost $160 billion a year if everyone eligible participated -- not the $35 billion Gore estimates.
- Even excluding persons earning less than $5,000 a year, which a Gore aide has said would be the case, and recognizing that perhaps only 5 percent of lower income households could scrape together $500 a year to participate -- coupled with an estimate of a 75 percent overall participation rate -- the annual cost would still be $120 billion.
- Too get the figure down anywhere near Gore's promise of only $35 billion in costs, participation among middle- and upper-income people would have to be held to 50 percent.
As for "saving Social Security," Gore's plan to use the Social Security surplus to pay down the debt would eventually mean a bill of at least $34 trillion for Social Security's unfunded liabilities. So when the bill for Social Security becomes due, either taxes would have to be raised 25 percent or benefits cut by that amount -- or the bill would have to be passed on to the next generation.
At any rate, Gore's two-pronged approach would necessitate a tax increase of 40 percent, according to those who have delved into the numbers.
Source: Susan Lee, "Al Gore's 40 Percent Tax Hike," Wall Street Journal, September 11, 2000.
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