Tax News

CCH (cch.taxgroup.com) reports:

  The 2009 report of the Board of Trustees of the Social Security Trust Funds released on May 12 shows that expenses are outpacing income for the Medicare and Social Security programs. In order to make up the shortfall, the annual report suggests either cutting benefits or raising payroll taxes. The report notes that the financial imbalance has been made worse by the current economic recession. The report projects a two-year drop in the Medicare solvency date, from 2019 to 2017. Congressional lawmakers were quick to express their commitment to keeping the Social Security program running smoothly and operating in a fiscally sound manner.

Report Results

  "Social Security could be brought into actuarial balance over the next 75 years with changes equivalent to an immediate 16-percent increase in the payroll tax (from a rate of 12.4 percent to 14.4 percent) or an immediate reduction in benefits of 13 percent or some combination of the two," the report says. Even greater changes would be necessary after 75 years since the projected longevity of Americans will result in longer retirements, the report states. Moreover, while both Medicare and Social Security costs will grow substantially faster than the economy, payroll tax revenue will not keep pace. The amount collected from taxing Old-Age and Survivors and Disability Insurance (OASDI) benefits will increase only gradually as the number of beneficiaries subject to taxation grows, the report says.

Congressional Reaction

  House Ways and Means Social Security Subcommittee Chairman John S. Tanner, D-Tenn., and ranking member Sam Johnson, R-Tex., assured seniors that their benefits will be paid. "Today's report shows that the recession is affecting Social Security just as it is affecting so many other parts of our economy. However, nothing in today's report should give seniors a reason to be concerned that their benefits will not be paid in full," the lawmakers said.

  House Minority Leader John Boehner, R-Ohio, said the report underscored the need for immediate action. "The Social Security and Medicare Trustees have repeatedly warned Congress and the American people that the programs must be reformed or future benefits will be threatened, and today's report is the most dramatic warning yet. Congress can't sit idly by while these programs go bankrupt; we must act now," he said.

  The social security report can be found on the Social Security Administration website at http://www.ssa.gov/OACT/TR/2009/tr09.pdf.

  The medicare report can be found on the Centers for Medicare and Medicaid Services website at http://www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2009.pdf.

  By Stephen K. Cooper, CCH News Staff