The estimated boost in Social Security taxes needed to save retiree benefits has spiked 65 percent since 2008.
The required tax boost is rising because politicians keep postponing the decision on how to fully fund the growing cost of the baby boomers’ retirement, said Jason Fichtner, a former deputy commissioner and an economist at the Social Security Administration.
“If we continue on the current course, then by 2035 the retirement program become insolvent, and … we’ll need a gigantic tax increase or a gigantic benefit cut, or a combination of the two,” he said.
“The longer we wait, the worse it will be be,” he said.
Washington hasn’t fixed the huge problem because President Barack Obama has rejected significant cost-saving proposals and reforms that are opposed by progressive groups, and the GOP’s leaders’ won’t agree to the tax increases demanded by Obama.
Social Security is now funded by a 12.4 percent tax on workers’ salaries.
But that tax rate won’t generate enough funds after 2033 to pay for the rising cost of the boomers’ retirement, according to May 31 report of the fund’s trustees.
The report is titled “The 2013 annual report of the Board of Trustees of the federal Old-Age and Survivors Insurance and federal Disability Insurance Trust Funds.”
The program won’t be bankrupt because future workers will continue to provide a huge flow of taxes to the boomers, Fichtner said. But the program will be increasingly insolvent because it won’t have enough cash to pay the bills, he said.
In 2008, the managers of the Social Security Trust Fund said the gap could be closed by an immediate 1.7 percent jump in the Social Security tax.
But on May 31, the trustees’ annual report said the gap has widened so much that it can only be closed by a 2.72 percent jump in the tax, to 15.12 percent.
That’s a 65 percent rise in only five years.
The May 31 report was treated as good news by liberal groups.
“Today’s Social Security Trustees Report should give workers and their families renewed confidence,” said Nancy Altman, the co-chair of the progressive Strengthen Social Security Campaign.
“If Congress listens to the American people and requires millionaires and billionaires to pay their fair share, the Report shows that all benefits can be paid for the next three quarters of a century and beyond,” she claimed.
“Indeed, the Report makes clear that our nation, the wealthiest in the world, can afford increased Social Security benefits, as a number of Senators and Representatives have wisely proposed,” she claimed.
“The most important take-away from the 2013 Social Security Trustees Report is that, in good times and bad, our Social Security system works and it works well,” said Eric Kingson, a founder of Social Security Works. “Fully affordable and structurally sound, Social security will meet all its obligations to the American people as far as the eye can see, with only a modest increase in revenues.”
Fichtner said he’s angered by “the shortsightedness of those who think there is no problem.”
“The very people who those [progressives] want to protect — the poor and disabled — will be hurt the most,” he warned.
The “people who are working and playing by the rules will be taxed more and will get a benefit cut,” he added.