From The Case For Using Subsidies For Retirement Plans To Fix Social Security by Andrew Biggs and Alicia Munnell:
The U.S. Treasury estimates that the tax preference for employer-sponsored retirement plans and IRAs reduced federal income taxes by about $185-$189 billion in 2020, equal to about 0.9 percent of gross domestic product.1 However, the best evidence suggests that the federal tax preferences do little to increase retirement saving. ...
The [report] concludes that it makes little sense to throw more and more taxpayer money at employer plans and IRAs. In fact, the case is strong for eliminating the current tax expenditures on retirement plans, and using the increase in tax revenues to address Social Security’s long-term financing shortfall. ...
This doesn't appeal to me. It's very unlikely to pass. There aren't specific tax revenues involved, just a reduction in tax preferences. I'd be more in favor of dedicating revenues from the estate tax, excise taxes and tariffs to Social Security but I doubt that would be enough to matter much. It's becoming more and more obvious to me that the only solution to the long term funding shortfall is an infusion of general tax revenues. The things that people discuss, raising full retirement age and lifting the cap on wages covered by the FICA tax, even together, aren't nearly enough to solve the long term funding problem.
8 comments:
FICA has to increase for everyone. Its a fact, ignored for over 5 decades. There is no place else to kick the can too.
SSA is in bad shape, but Medicare is what you should be scared about. Really, the healthcare system is on the brink of total meltdown. Imagine your retirement with double the Part B premium, or 70% coverage, or mandatory Managed Care Organization Advantage Plans. Its all right there at the tip of your nose where you can ignore it.
This is a terrible idea. There are so many better ways to extend the SSA trust fund -- but all require Congressional intervention. The GOP plan is to do nothing and then screw over younger Americans in 2034. The "compromise" will be cut for future generations. Democrats need to grow a pair and present real reforms. But the Senate filibuster will make any reform impossible. I cannot comprehend why Dems still support the filibuster when they have no prospects of getting a 60 seat majority within the next 10 years.
Host wrote, "It's becoming more and more obvious to me that the only solution to the long term funding shortfall is an infusion of general tax revenues."
It should be more and more obvious that the long term solution is just to increase the payroll tax on individuals by 1% and for employers by 1%, and to tax income over $400,000 indexed by inflation. Game done.
A whole bunch of solvency provisions are scored here https://www.ssa.gov/oact/solvency/provisions/index.html
Eliminating the cap on FICA without providing any additional benefits would eliminate 70% of the long-range shortfall. There are other proposals that would increase benefits for those who would have to pay more; obviously those don't close as much of the gap.
Gradually raising the normal retirement age to 70 and the early one to 65 closes 25% of the gap.
So I wouldn't say that doing those two things "aren't nearly enough" to solve the shortfall--they get 95% of the way there. There are a myriad of other changes that could also fix the shortfall. Larger changes will be needed the longer Congress takes.
I want to see you go to Quest and get you blood draw done by a 69.5 year old phlebotomist, before going to get something to break the fast you had to do before the blood work and wait at the counter for the 67 year old to ring you out. Then jump in your car, you stew and grumble waiting for the 68 year old guy to turn the construction stop sign so you can get to the office. Once there, you have to explain again for the 100th time to the 69 year old receptionist about the changes to the spreadsheet she doesnt understand.
Absolutely screw you if you think I am going to work until dead to pay for you retiring a decade earlier than me. Lets go full Soylent Green and start grinding up Boomers at the age of 80, that will save us 100% of the shortfall.
You can instantly tell the people that have only worked indoors all of thier lives...
@1132 AM Life expectancy for US males is 85, 87 for females, that live to age 70.
"However, the best evidence suggests that the federal tax preferences do little to increase retirement saving."
What is this evidence? i can't imagine saving nearly as much as I do if it was taxed.
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