The tax cuts ignore this impact on Social Security's finances [View all]

[Zorro]

The issue of Social Security is nearly invisible in the eye of the voter these days. Congress has just approved a massive tax reform without even a word about how it will affect the long-term financial prospects of the nation’s social insurance programs.

Typically, even critics of the GOP’s ideas on tax reform limit their concerns to the possibility that rising budget deficits might force Congress to consider reductions to benefit levels in Social Security. To them, the connection between tax reform and Social Security is a matter of politics and priorities.

Make no mistake, the connection isn’t political. It is economic. Social Security draws revenue from the income taxes levied by the IRS on benefits. Medicare also collects money. Thus, meaningful tax reform particularly for those in the middle class is apt to add to the financing pressures of both.

Income-tax revenue is important to Social Security because it is free cash flow that is forecast to grow rapidly. In the latest trustees’ report, the authors projected that the system would gather about $35 billion in revenue from income taxes in 2017. While this sum is currently overshadowed by payroll tax revenue, income-tax support for Social Security is projected to grow at more than three times the rate of the economy to more than $80 billion over the coming decade. That figure approximates the payroll taxes of roughly 20 million active workers.

https://www.marketwatch.com/story/the-tax-cuts-ignore-this-impact-on-social-securitys-finances-2017-12-21