25. This is the only instance under Option 2 for which constant-dollar benefits decrease from the 2010 to the 2050 cohorts of new retirees; for details, see Appendix C. For high earners, the real benefits in 2035 under this option would be less in 2035 than 2010; see details in Appendix C.


26. Imposing a second-tier tax without a benefit credit thus tends to move the Social Security program away from its contributory character.


27. Estimates of the revenue from Option 4’s tax changes (as for Option 3) rely on projected income distributions. These are included in the actuarial estimates in the current program Trustees’ Report (Social Security Administration, 2009d). The Social Security Administration’s actuaries have long had to project income distribution for the program’s revenue estimates under current law because of the tax paid on some Social Security benefits by relatively upper-income payers of the current personal income tax.


28. By reducing or delaying benefits for future retirees relative to those scheduled under current law, Options 1, 2, and 3 would reduce the program’s contribution to income security in old age for all earnings groups; however, the reductions are proportionately larger for those with higher earnings. Option 4 would preserve the program’s currently scheduled benefit-growth rates by taxing wages more heavily in the future. Options 2, 3, and 4 would raise taxes for all earnings groups; however, the larger increases in Options 3 and 4 would be borne more by the highest earnings groups. Because payroll taxes do not apply to nonwage income, such as business profits, interest, and capital gains, options that increase payroll tax rates disproportionately affect the people who are most reliant on wage income.


29. As of June 30, 2009, about 90 percent of the population aged 65 and over was receiving Social Security benefits, and about 94 percent of employed people and those who are self-employed were covered under the program (Social Security Administration, 2009a).

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