A Way to Help Save Social Security

"Depending on who is counting, Social Security runs out of money in 2033. At that point, benefits paid will be about 77% of what they are today. Congress offered a little-known solution. It listed two reasons why Social Security payments are taxed. One was to treat payments like those of any other income. "The second was to provide revenue to strengthen the financial solvency of the Social Security trust funds." The second point is important."

"One way to extend the lifespan of Social Security is to waive the taxes on the payments. On paper, this means the burden triggers an increased U.S. deficit as some of the federal government's income drops. However, those who receive payments keep more money. The math is not easy to come by, but it is something like this. The annual total of these payments is about $1.5 trillion. Payment to the disabled and dependents is about 10% of that, according to the Social Security Administration."

"What does the federal government receive on these taxes? It is not entirely clear. However, across most sources, the figure is about $90 billion a year. Old-Age and Survivors Insurance and Disability Insurance (OASDI) accounts for at least $51 billion of that. Medicare Hospital Insurance (HI) represents at least $35 billion. So, the total benefit for recipients depends on which payment segments the taxes affect."

Social Security faces depletion around 2033, leaving benefits at roughly 77% of current levels. Congress identified two reasons that Social Security payments are taxed: to treat payments like other income and to provide revenue to strengthen trust fund solvency. Waiving taxes on payments would reduce federal revenue and increase recipients' net income. Total annual Social Security payments are about $1.5 trillion, with roughly 10% going to disabled beneficiaries and dependents. Annual federal revenue from taxing those payments is about $90 billion, including at least $51 billion from OASDI and $35 billion from Medicare HI. Retirement program costs exceeded income since 2021, with a projected gap rising to $414.5 billion by 2033. The precise solvency extension from eliminating these taxes is difficult to calculate.

Read at 24/7 Wall St.