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Could Congress agree to an SSDI tax hike?

For years, it has been known that the Social Security Disability Insurance (SSDI) trust fund would run short of funds, and that if Congress does not fix this shortfall, it will lead to a cut in the monthly payment to SSDI beneficiaries.

While there has been much made of some of the recent growth in the program and of allegations of fraud within the program, but in reality, the exhaustion of the trust fund in 2016 was projected by the Social Security Office of the Chief Actuary in 1995. 

This means that events in the early years of this century had no appreciable affect on the operation of the trust fund, and that the funding limits on the program set in 1994 by the last Congressional reallocation of funds between the retirement (OASI) and disability (SSDI) trusts are the real reason the fund is headed for a shortfall.

So, it would be good if Congress ends its squabbling over the minutia and decides to actually address the real problem facing all of Social Security's programs, that of insufficient funding. Benefit cuts are not a realistic solution, aside from being unpopular with the millions who currently receive benefits and those who will receive them in the future. In addition, without a tax increase, the level of cuts would severely affect most beneficiaries.

They should first remove the cap from the payroll tax, which currently is set at $118,500. Given that much of the growth in U.S. incomes has occurred at this level and above, it seems reasonable, as it would properly capture earnings that in another time may have been more evenly distributed.

Another option would be to means-test benefits. This would better allocate the limited resources of the program to the truly needy.

While these proposals seem reasonable, none of these ideas managed to gain traction in Congress when it was less fractious, and with the strong anti-tax feelings present, is seems unlikely these changes will be enacted in this session of Congress.

Forbes.com, "Tax Hikes To Fix Retirement Security Woes?" Ashlea Ebeling, May 14, 2015

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