DAILY SUMMARY May 8 - 11

[National Dialogue Moderator <moderator>]

Daily Summary May 8-11, 1999

Moderator's Question -- "Taxing Benefits":

Sunday, May 9: Bob Rosenblatt asked whether a greater portion of Social Security benefits should be taxed. He noted that private pension payments are generally taxable but that only a portion of Social Security benefits are taxable and the amount depends upon one's income. He said it would help the trust fund and the financial burden would fall on those most able to pay.

• Ann Combs said taxing Social Security benefits like other pension income makes sense. She noted, however, that issues, such as the amounts of the benefits subject to tax (employer contributions vs. employee contributions) must be addressed.

  In addition, she noted that the effect would be greatest on middle income workers. Low income beneficiaries would be exempt due to other tax subsidies and exemptions. High income beneficiaries would actually owe less since their contributions (which would not be subject to the tax) represent a large percentage of their ultimate benefit.

• Sam Beard opposes the idea of increasing the amount of benefits that are currently taxed. He said taxing low-income beneficiaries would hurt those most dependent on Social Security for their retirement income.

• John Rother said that additional taxation of benefits could improve the program's long-term health (assuming the receipts are deposited in the Social Security trust funds), but he is concerned about the impact on middle and moderate income beneficiaries. He said AARP is opposed to further taxation until careful study is given to the distributional consequences.

• Gerry Shea said that as a member of the 1994-1996 Advisory Council on Social Security, he supported a plan that would have taxed al benefits in excess of already taxed employee contributions. He said he would probably not support it again because we have better options available now, such as using a portion of the projected budget surpluses. He is concerned about the impact on people with only modest retirement incomes.

• Ron Gebhardtsbauer made some calculations and asked the audience to make the policy decision. He agreed that low and high income people would not be substantially affected. He noted Rother's calculations that a couple with $32,000 in retirement income would pay an additional $1,900 in taxes and his own calculations that a couple with income just above $40,000 would pay an extra $3,000.

Public comments and questions - "Taxing Benefits":

• One commenter asked for the justification to tax more than 50 percent of Social Security benefits. He said benefits are financed equally by employer contributions, on which an income tax deduction has been taken, and employee contributions, which are required to be included in reported taxable income and for which no deduction is allowed.

Other public comments:

• On raising the retirement age, one commenter stated that raising the retirement age is unrealistic. Only a handful of lucky people will get to age 70 to receive benefits - at the expense of others. Social Security will become a lottery game. He asked whether the benefits will compensate someone who worked 50 years and retired at age 70.

• On the Clinton plan, one commenter asked the panelists and others to "defend the Clinton Plan". He said Clinton's proposal will simply increase the government's debt to Social Security by the government bonds that he proposes to give it.

• One commenter noted that any solution will require a number of components. Individual ideas should not be dismissed merely because they alone will not solve the problem by themselves.

• One commenter stated that increased productivity by advancing technology will reduce the number of available jobs in the future and that the government and employers will be encouraging workers to retire early. He said we're facing the challenge of the 21st Century with 20th Century rehash.

Ashley Schannauer