fagin@ucbvax.ARPA (Barry Steven Fagin) (07/22/85)
The following figures are taken from a study by the Cato Institute,
a libertarian think tank located in Washington D.C. The upshot
of the study is that Social Security is an raw deal for those
now entering the workforce; it suggests a plan for meaningful reform
without benefit cuts or tax increases.
Social Security Real Rates of Return for Different
Family Combinations
1) Single worker, earns maximum income, -1.5%
never marries, no children
2) Married couple, both spouses earn -1.0%
maximum incomes, two children
3) Married couple, one spouse earns -0.5%
maximum income, other earns average
income, two children
4) Married couple, one spouse earns -0.5%
maximum income, other earns low income,
two children
5) Married couple, one spouse earns 0.0%
maximum income, two children
6) Single worker, earns average income, 0.0%
never marries, no children
7) Married couple, both spouses earn +0.5%
average incomess, two children
8) Married couple, one spouse earns +1.0%
average income, other earns low income,
two children
9) Married couple, one spouse earns +1.5%
average income, two children
10) Married couple, both spouses earn low +1.5%
incomes, two children
11) Single worker, earns low income, never +1.5%
marries, no children
12) Married couple, one spouse earns low +2.75%
income, two children
Some definitions:
Low income workers were assumed to earn a salary each year for their
entire career equivalent to the minimum wage today.
Average income workers were assumed to earn the average wage in
Social Security-covered employment each year for their entire
career.
Maximum income workers were assumed to earn the maximum Social
Security-taxable income each year for their entire career.
Low income workers were assumed to be 18 in 1983, average-income
workers to be 22, and maximum incomce workers to be 24.
Nonworking spouses were assumed to be the same age as their
working spouses. Married couples were assumed to be married in
1983, to have one child when the oldest worker reached 26, and to
have another when the oldest worker reached 28. All workers were
assumed to retire at age 67, which will be the normal Social
Security retirmenet age for thesse workerss under current law.
All other assumptions were taken from the Alternative IIB sset of
assumptions in the 1983 Annual Report of the Board of Trustees for
Social Security's trust funds.
The kind of Social Security reform Cato suggests involves "allowing
workers to contribute to their IRAs each year an amount up to 20 percent
of their Social Security retirement taxes, in addition to any other
amounts they may contribute under current law. Instead of the usual IRA
income tax deduction for these contributions, however, workers would
receive a dollar-for-dollar income tax *credit* equal to the amount of
such contributions. Workers would also have the right to direct their
employers to contribute up to 20 percent of the employer share of the{
tax to the workers' IRAs, with each employer again receiving a full
income tax credit for these amounts."
The study goes into a lot more detail, suggesting that this idea be
eventually expanded to allow workers to decide how much to rely on their
"Super-IRA's" and how much on Social Security. It notes that
since the tax credit would be taken againt income taxes rather than
payroll taxes, Social Security revenues would continue to flow into
the program for today's elderly. Other advantages include a potential
25% decrease in federal spending, greater freedom of choice in
income disposal, increased job creation and economic growth as
payroll taxes are reduced, and an increased savings rate.
For more details, write:
Cato Policy Report
224 Second Street SE
Washington, DC 20003
--
Barry Fagin @ University of California, Berkeleysophie@mnetor.UUCP (Sophie Quigley) (07/25/85)
> The following figures are taken from a study by the Cato Institute, > a libertarian think tank located in Washington D.C. The upshot > of the study is that Social Security is an raw deal for those > now entering the workforce; it suggests a plan for meaningful reform > without benefit cuts or tax increases. > > Social Security Real Rates of Return for Different > Family Combinations > > etc..etc..etc.. (lots of ngative returns and a few very low positive ones. > -- > Barry Fagin @ University of California, Berkeley I noticed one very interesting trend in the "family combinations" chosen: Even though it looks very complete, it is missing one very important family combination (the one with highest return I would assume), single parents. Why is this? single parents are not an anomaly anymore (were they ever?) -- Sophie Quigley {allegra|decvax|ihnp4|linus|watmath}!utzoo!mnetor!sophie
fagin@ucbvax.ARPA (Barry Steven Fagin) (08/23/85)
In article <1568@mnetor.UUCP> sophie@mnetor.UUCP (Sophie Quigley) writes: >> >> Social Security Real Rates of Return for Different >> Family Combinations >> >> etc..etc..etc.. (lots of ngative returns and a few very low positive ones. >> -- >> Barry Fagin @ University of California, Berkeley > >I noticed one very interesting trend in the "family combinations" chosen: >Even though it looks very complete, it is missing one very important family >combination (the one with highest return I would assume), single parents. >Why is this? single parents are not an anomaly anymore (were they ever?) >-- >Sophie Quigley >{allegra|decvax|ihnp4|linus|watmath}!utzoo!mnetor!sophie You are correct; single parent family figures were not included in the study. Calculating the rate of return for them would be informative. Indeed, if you are the survivor of a deceased parent, Social Security is probably an outrageously good deal, since you can start collecting benefits before you even think about working. These benefits are available regardless of how much money you make; the surviving children of millionaires get just as much as the surviving children of the poor. The fact of the matter remains that Social Security sticks it royally to the Joe and Jane Averageworker of today. The more people become aware of this, the greater the chances of *real* Social Security reform. --Barry -- Barry Fagin @ University of California, Berkeley