Joseph White`s proposal (Sept. 4) for increased taxation of Social Security benefits ignores the fact that 50 percent of the benefit, not taxed under current law, is in effect a return of employee principal.
For example, a person who entered the work force in the mid-1950s contributed approximately $37,000 of after-tax earnings (assuming maximum contributions during all years through 1989).
Using current estimates of benefit payments, it will take six to seven years to recover over the principal amount contributed by the employee. If interest on the principal is included at a conservative rate, the recovery of principal and interest could take an additional three years.
Mr. White`s proposal should be modified to tax benefits in excess of 50 percent only after the employee`s contribution has been fully recovered.
Mr. White states that the tax will raise $13 billion in 1994. I suggest that an alternative to taxing the elderly is to not forgive debts, such as the recent proposal to forgive Egypt $6 billion.
