IPI PolicyBytes | Categorised Content

TaxBytes 7.20: How Washington Hammers Early Retirees

Merrill Matthews, Jr. — Tue, 25 May 2010 10:23:44 -0500

So you’re 62 years old and have been downsized, laid off or forced into early retirement because of the struggling economy. And you think to yourself, “I’ll take early retirement under Social Security, which will provide a small but reliable (let’s hope!) income, and get a job that will pay maybe $20,000 or $25,000 a year to make ends meet.”

In a word: fugetaboutit!

That’s because Social Security will withhold one dollar for every two you make above $14,160 this year. It’s called the Social Security earnings limit, and it exists to discourage older Americans from taking early retirement under Social Security.

The original earnings limit was created with the passage of Social Security in 1935 to fulfill social policy, not economic policy.

TaxBytes 7.19: Cut to the Revolution

Merrill Matthews, Jr. — Tue, 18 May 2010 16:21:19 -0500

The House Republican leadership has just announced You Cut (http://republicanwhip.house.gov/YouCut/) where, along with a greeting by House Republican Whip Eric Cantor explaining the need to get federal spending under control, the public can “vote” on several potential cuts in the federal budget. Votes can be rendered either on the website or from a cell phone.

This week’s choices include, among other options:

$260 million for the presidential election fund. After singing the praises of government-financed elections, President Obama refused to take federal money because it would limit what he could raise. Eliminating this program would mean all presidential elections would be funded by private contributions.

$600 million for taxpayer subsidized union activities.

TaxBytes 7.17: A Short, Painful Lesson on ‘Benefits Cuts’

Merrill Matthews, Jr. — Tue, 4 May 2010 15:14:58 -0500

On Fox News Sunday, anchor Chris Wallace asked Florida U.S. Senate candidate Marco Rubio, a Republican, if he still stood behind a statement he had made on the program a month earlier that he would support Social Security benefit cuts for people under the age of 55.

Rubio confirmed that he did, and went on to add that he believed all serious observers agreed that benefits would need to be cut.

We disagree, but more about that in a minute.

If we lived in a “post-partisan” political world, where ideas could be proposed and discussed in an intelligent manner, then we could have a rational discussion about benefits cuts.

But Washington’s political divisiveness has become a national embarrassment, with name calling, and scoldings and massive pieces of legislation being forced through without one single vote from the minority party.

TaxByte 7.12: Obamacare and Obamaccounting

Merrill Matthews Jr. — Tue, 30 Mar 2010 16:06:35 -0500

I predict that one of the most common phrases in the American vocabulary over the next few years will be, “I didn’t know the health care bill would do that.” And Democrats will be saying it most.

Even as the president traveled to Iowa City to let everyone know Armageddon hadn’t happened, several large companies declared they would start health-reform-related write downs--AT&T for $1 billion.

Here’s the back-story. In 2003, Congress passed the Medicare prescription drug benefit. There was a concern among legislators that including that benefit might encourage large employers that provided retiree coverage to phase it out.

Republicans, who controlled Congress, decided to provide those companies with a subsidy, spending about $665 per retiree to subsidize the employer’s plan, but saving $1,209 if the retiree had been dumped into Medicare.

TaxBytes 7.10: Doubling Down and Double-Counting

Merrill Matthews Jr. — Tue, 16 Mar 2010 14:58:40 -0500

So how did Social Security get tied up in health care reform? It’s kind of complicated so stay with me.

The Senate version of the health care reform bill that the House is supposed to vote on this week—um, let me correct. Despite weeks of Democrats calling for an “up or down vote,” the House isn’t actually going to vote on the bill. It’s going to vote on amendments to the bill and, if they pass, the Senate version will be “deemed” to have passed—without an actual vote on the bill.

Anyway, in the Senate bill is the “Cadillac tax” that makes employer-provided health insurance subject to taxation above a certain level. That means that employees with high-cost health insurance will, at some point after 2018, start paying more taxes—including Social Security taxes.

SoundBytes 224: What Will the President Say in His State of the Union?

Merrill Matthews Jr. — Wed, 20 Jan 2010 14:43:09 -0500

What Will the President Say in His State of the Union? The Institute for Policy Innovation’s Dr. Merrill Matthews says he has some explaining to do.

Washington is all atwitter over President Obama’s upcoming State of the Union address. And understandably so, because the president has some serious explaining to do, like:

How he plans to get control of the $1.4 trillion federal deficit, more than three times the deficit Obama was so critical of under George Bush.

And how he intends to pay for all the Democrats’ new federal spending. Yes, he could raise taxes, but he already has several new taxes in his health care bill.

And maybe the president can explain why his much-boasted stimulus bill has had little impact on creating new jobs.

TaxBytes 6.40: The Future Is Here

Merrill Matthews Jr. — Tue, 6 Oct 2009 11:46:07 -0500

Here’s another casualty of the economic downturn: Social Security.

The Social Security program operates on a pay-as-you-go basis. Money coming in from workers is neither saved nor invested, but rather pays benefits today for current retirees.

Government officials had predicted that Social Security would take in more than it paid out until 2016, whereupon it would start drawing down surpluses from the Social Security trust fund.

But the severe recession has hurt government revenues, which means the future is here. The Congressional Budget Office now says that Social Security is already short: $10 billion this fiscal year and $9 billion next year.

TaxBytes 6.24: Affordable Coverage Starting at $60k

TaxBytes — Tue, 16 Jun 2009 12:59:55 -0500

Well, whatever else can be said about health care reform, it now seems clear it won’t be cheap.

Rep. Charlie Rangel (D-NY), who heads the House Ways and Means Committee, says he expects to raise $1 trillion for health care reform (over 10 years) by cutting Medicare and Medicaid spending by $400 billion (ouch!) and raising taxes by $600 billion (double ouch!!)

President Obama is putting a little detail in his proposed Medicare cuts.

He wants to chop $106 billion from the disproportionate share hospital program. Actually, cutting the “DSH” program is reasonable. It’s federal money that reimburses certain hospitals that treat a “disproportionate” number of uninsured. If nearly everyone has coverage—and that’s a big IF—then reducing DSH payments makes sense.

The president also wants to cut $110 billion by making “productivity adjustments” to Medicare providers.

TaxBytes 6.22: The Next New Entitlement Program?

TaxBytes — Tue, 2 Jun 2009 16:12:41 -0500

The Wall Street Journal reports that Senator Edward Kennedy (D-MA), who chairs the Senate Health, Education, Labor and Pension (HELP) Committee, will soon introduce his disability program known as the CLASS Act.

If you were taking some consolation that Congress had spent so much money over the past few months that funding its remaining wish list, like health care reform, was impossible, well then unconsolate yourself. The CLASS Act could siphon out of the economy the estimated $1.2 trillion over 10 years for the Obama health plan, with billions to spare.

The legislation creates a new government-run disability program. All workers would be automatically enrolled. People could opt out—at least that’s what we’re being told now—but sponsors don’t expect many people to do that.

SoundBytes 189: Is Your Social Security Check Safe?

SoundBytes — Fri, 8 May 2009 15:42:38 -0500

Is Your Social Security Check Safe? Dr. Merrill Matthews of the Institute for Policy Innovation says yes, but for how long?

When some of us raised concerns about Social Security’s financial soundness, liberals always accused us of being fear mongers.

Well, the fear is here. Steve Moore of the Wall Street Journal reports that President Obama’s budget says this year Social Security will pay out $8 billion more than it’s taking in.

It wasn’t supposed to hit this point for 10 years, but the economic downturn has hurt government revenues.

Defenders claim there’s still a Social Security trust fund to draw from. True, but the government has borrowed all of that money and spent it.

So Social Security is broke in fact, if not on paper. Monthly checks will no doubt still be paid, but it’s borrowed money—and borrowed time.