Young people in the US could be hit with significant income losses because of delays in sorting out problems with the country’s Social Security and Medicare programmes, a report from a bipartisan Washington think tank has warned.
Medicare’s Hospital Insurance trust fund is currently expected to run out of money by 2026, while Social Security reserves are projected to drop to zero by 2034. Without further action, benefits paid to Social Security beneficiaries would drop by 21% after the insolvency date, while Medicare’s hospital benefits would initially be cut by 9%, rising to an average of 17% over time.
To keep the Social Security trust fund solvent would require an immediate increase in the payroll tax rate from 12.4% to 15.18%. Delaying a payroll tax increase to the year the fund is expected to run out of money would result in a hike to 16.27% at that time.
Likewise, keeping the Medicare Hospital Insurance trust fund with money in the bank after 2026 would require payroll tax to rise from 2.9% to 3.72% today. A further increase to 3.84% would also be required if the hike was put off until the fund was depleted in 2026.
The Social Security fund was financially healthy for two decades due to contributions from working Baby Boomers. But from 2010 onwards, it has experienced a cash deficit that is only going to get worse unless it is fixed, the report’s co-author Charles Blahous told Forbes.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
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Young people in the US could be hit with significant income losses because of delays in sorting out problems with the country’s Social Security and Medicare programmes, a report from a bipartisan Washington think tank has warned.
Medicare’s Hospital Insurance trust fund is currently expected to run out of money by 2026, while Social Security reserves are projected to drop to zero by 2034. Without further action, benefits paid to Social Security beneficiaries would drop by 21% after the insolvency date, while Medicare’s hospital benefits would initially be cut by 9%, rising to an average of 17% over time.
To keep the Social Security trust fund solvent would require an immediate increase in the payroll tax rate from 12.4% to 15.18%. Delaying a payroll tax increase to the year the fund is expected to run out of money would result in a hike to 16.27% at that time.
Likewise, keeping the Medicare Hospital Insurance trust fund with money in the bank after 2026 would require payroll tax to rise from 2.9% to 3.72% today. A further increase to 3.84% would also be required if the hike was put off until the fund was depleted in 2026.
The Social Security fund was financially healthy for two decades due to contributions from working Baby Boomers. But from 2010 onwards, it has experienced a cash deficit that is only going to get worse unless it is fixed, the report’s co-author Charles Blahous told Forbes.
Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.
OTHER ARTICLES THAT MAY INTEREST YOU
Victoria slashes regional payroll tax in half
Hungary to continue payroll tax cuts - if wages grow fast enough
