Are you assuming a lowered and simplified tax rate has zero impact on economy? Really so the economy stay exactly the same size even though everything just got easier and cheaper?
But you are right about Social security and medicare. That's actually the much larger tax bill for many Americans. But privatizing social security like they did in Australia would solve that problem.
In the 90's, Australia privatized their equivalent of Social Security because they correctly predicted the demographic bust, and switched to the national equivalent of a 401(k) with a safety net. Privatizing Social Security in the US is a good idea, or would have been back in the 80's while the baby boomers were hitting their prime earning years. But, I think we missed the opportunity.
For the last 40 years, Boomers have been paying for their parent's and grandparent's Social Security benefits, while making a down-payment on their own (to the the Trust Fund, which is up to about $3T). But, the Trust Fund will be exhausted about 2035. Without any changes before then, Social Security will have to cut benefits about 25% (as they can't borrow money) in 2035.
The unfunded liability (the difference between benefits promised and taxes expected to be collected) of Social Security is now about $43 trillion. Note it is not included in the official government debt, and is twice that. And therein lies the problem: how do you privatize Social Security when that much money is already owed to people that have been contributing all this time? Where does it come from? And since that unfunded liability assumes people will continue paying Social Security taxes, how do you replace that tax income if they instead contribute to their own account?
Spez: I should note that the $43T unfunded liability is for an "infinite horizon". If you only look at the next 75 years (through 2093), the unfunded liability is "only" $14T. If you are considering sunsetting Social Security during that period, it's a better estimate.
To give you a better idea of the magnitudes: This year, Social Security collects about $1.1T in payroll taxes and interest, and pays about $1.1T in benefits. The benefits payments will soon exceed income, and the difference will be made up from the Trust Fund. As the differential grows, the Trust Fund will be depleted faster. That's why it is expected to be exhausted in about 15 years.
Are you assuming a lowered and simplified tax rate has zero impact on economy? Really so the economy stay exactly the same size even though everything just got easier and cheaper?
But you are right about Social security and medicare. That's actually the much larger tax bill for many Americans. But privatizing social security like they did in Australia would solve that problem.
In the 90's, Australia privatized their equivalent of Social Security because they correctly predicted the demographic bust, and switched to the national equivalent of a 401(k) with a safety net. Privatizing Social Security in the US is a good idea, or would have been back in the 80's while the baby boomers were hitting their prime earning years. But, I think we missed the opportunity.
For the last 40 years, Boomers have been paying for their parent's and grandparent's Social Security benefits, while making a down-payment on their own (to the the Trust Fund, which is up to about $3T). But, the Trust Fund will be exhausted about 2035. Without any changes before then, Social Security will have to cut benefits about 25% (as they can't borrow money) in 2035.
The unfunded liability (the difference between benefits promised and taxes expected to be collected) of Social Security is now about $43 trillion. Note it is not included in the official government debt, and is twice that. And therein lies the problem: how do you privatize Social Security when that much money is already owed to people that have been contributing all this time? Where does it come from? And since that unfunded liability assumes people will continue paying Social Security taxes, how do you replace that tax income if they instead contribute to their own account?
Spez: I should note that the $43T unfunded liability is for an "infinite horizon". If you only look at the next 75 years (through 2093), the unfunded liability is "only" $14T. If you are considering sunsetting Social Security during that period, it's a better estimate.
To give you a better idea of the magnitudes: This year, Social Security collects about $1.1T in payroll taxes and interest, and pays about $1.1T in benefits. The benefits payments will soon exceed income, and the difference will be made up from the Trust Fund. As the differential grows, the Trust Fund will be depleted faster. That's why it is expected to be exhausted in about 15 years.