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New Report Shows How Much Payroll Taxes Will Have To Increase To Save Social Security
April 27, 2012
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In what could be part of the upcoming year-end tax and budget battle, the Medicare and Social Security Trustees warned this week that significant increases in payroll taxes and/or benefit cuts will be required to save the two retirement programs from insolvency. According to the new 2012 Social Security trustees' report, last year, the program spent $137 billion more than it took in from its payroll tax, and is projected to spend $800 billion more than it takes in over the next 10 years. Congress could eliminate the long-term Social Security deficit by either increasing the combined payroll tax rate by 2.8 percentage points from 12.4 percent to 15.2 percent, or immediately decreasing scheduled benefits by 17 percent, or some combination of the two. The new Medicare trustees report also shows the hospital trust fund (Part A) is projected to spend $170 billion more than it takes in over the next 10 years, with a 30 percent cut in provider payments in 2013, but the amount increases to $402 billion if Congress continues to pass the annual “doc fixes” as it has in the past. The Social Security trustees urged Congress not to delay fixing that program, noting that the sooner actions are taken the more options are available and the more time the public will have to prepare for the changes.
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