Your recent editorial (”Bush`s economist and Social Security”)
correctly rejects Michael Boskin`s radical proposals to reform Social Security. However, your alternative-to fully tax Social Security benefits-is bad Social Security policy and bad tax policy. Social Security did not create the federal budget deficit and its beneficiaries should not be singled out for a tax increase in a misguided effort to reduce the deficit.
Benefits were first taxed in 1983 to help restore Social Security`s solvency, not to deal with the deficit. By law revenues from taxation must be credited to the trust funds in order to help pay benefits for current and future beneficiaries. The rate was set at 50 percent in recognition of the fact that the employee`s share of payroll taxes was paid with after-tax dollars. Fully taxing Social Security would result in a substantial tax increase on low- and middle-income elderly. Also, it would bring onto the tax rolls 6.6 million older persons, who were removed under tax reform.
Finally, there is the question of simple fairness toward one group: older Americans. In addition to having their benefits taxed for Social Security purposes, older persons have made direct sacrifices in the name of deficit reduction. For example, direct beneficiary cuts in Medicare ammounted to $12 billion since 1982, and over the last several years deficit reduction-based program cuts affecting the elderly have totaled $70 billion. In addition, in 1986 this group contributed to a fairer federal income tax through the elimination of the extra personal exemption. Also, those who are more fortunate are helping ease the burden of premiums to cover the cost of Medicare`s catastrophic health care for other less-fortunate older persons.
The American Association of Retired Persons is well aware of the need to curtail our nation`s serious budget deficit. However, deficit reduction must be accomplished in a way that distributes the burden fairly among all members of society.
