The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Social Security Finance «» present Law and Wagner«»Murray-Dingell Bill
SISMMY
Iho present Social Security program ia now financed by a 5 per cent
payroll tax* per cent on employers and X per cent on employees* ttader the
Aot the tax rate it scheduled to increase January X to 7 per oent* 2 per cent
on employees, 5 per cent on employers* Reserves for old ago insurance are now
around $6 billion and will increase greatly in the future# to above flOO billion
In the course of about 50 yoare* &eserves for unemployment compensation are
over $6 billion and also are increasing*
fh® Wagner~Murray«*I&ngell bill eonteajplates expanding greatly the
number of people covered, increasing the benefit rates and Introducing m m
program® to cover risks not no* covered* fite bill calls for a payroll tax
Of 12 per cent, 6 per cent on esaployeea* 6 per cent on employers* It la estimated that reserves under this bill would continue to Increase until
I960* a* Hot until then would expenditures begin to exceed receipts*
Brief explanations of these things follow along with a table shorting
estimates to the year 2000 under the present program and under the WagnerMurray^DingelX bill*
X* Present Law
1* Old Age and Survivors1 Insurance
a) Current contribution rates are X per cent to be paid by eisployers and
employee* each on the first $5000 of wges* Increase to 2$ per cent
was scheduled for
but postponed* Increase to 2 per cent was
scheduled for 19^3
postponed twicet the second tisss to January 1$
19^5* Xtodor current law* the rate is to increase to 2 per cent on
January 1* 19k5t 2|jS on January
19^6 and % on January 1,
b) Expenditures and receipt estimates for the present program are shown
in Xabie l* ihe estimates of future tax and benefit levelst prepared
by actuaries of the Social Security Board are speculative because they
involve assumptions for the years 1945 to 2000 with respect to labor
force, employment* wage and price levels and so forth* Jhese estimates are on the low side of the range* they show an excess of receipts
over expenditures of about f1*050 million per year from 1950 to tho
year 2000* On the receipt side, the table shows an Increase in the
relative importance of interest payments as a revenue source*
the table indicates that the benefits now provided for could be
finanoed by a 2 per oent (X per cent employer and employee each) rate
until I960) or 2*7 per eent rate until 1976 and a
per cent rate
until the year 2000* Tetr an increase of the rate to 4 per cent is
scheduled now* and to 6 per cent by
m Q m
e) fho trust afond* as ehovnx in Jable l i e estimated to Increase from
its present level of newly |6 billion to fl7 billion by 1950*
|36 billion by I960,
billion by 1970 and #103 billion by the
year 2000*
these £Lgures are on the low side of t&e range*
On the high side* the Social Security Beard estiiaates a figure of
billion for the year 2000*
2* Unemployment Insurance
n) Unensployment insurance is financed Tjy «i J per cent contribution of the
employer# reduced someisfhai in moat states by merit rating provisions*
So further increase is scheduled*
b) Receipt a from tfae unemployment compensation tax are now about §1,5
HTEon^per annua* Benefit payments during the fiscal year 19w *©re
$60 million*
e) the Oaemploysent trust fund now is over #6 billion, credited to the
different state
As tuning a mooth transition to peace time production and little unemployment* the fund id 11 increase further*
5* Other Social Security Benefite
Other Social Security progress, such as old age assistance* aid to
blind* and aid to dependent children, etc*, are financed by matching Inderal
grants to State and Local govermentfl* In the fiscal year
total ©spendi*
turea by State and Local governments for t&ese purposes amounted to about
#900 million* Of this about one^haif was contributed by the federal governs
ment, this contribution being financed out of the general budget*
II* Wagner^urrsy^pingell Bill - (s* 1161)
The expanded social security program under the ??a£tter-«Murray~;Di eg ell
bill proposee to (1) broaden coverage and increase benefits under the Old
Age and Survivors1 Insurance* add a permanent disability insurance! (2) federalize
unesiploysaent Insurance* extend coverage * liberalise benefits and add temporary
disability insurance including sickness, accident and maternity benefite|
($) provide medical and hospitalisation insurance*
She expanded system is to be financed by a 12 per cent payroll tax
(6 per cent contribution by employer and employees each)* 0f this* it is
assumed about 4 per cent will pay for the old age* survivors and permanent
disability insurance! the remaining 8 per cent for the other *current cosrfc*
programs* as folio*** b p w cent for uneaaployss^at insurance* % per cent for
temporary disability insurance/1 per cent for hospitalisation and 2 per
cent for medical care* $elf«*einployed persons are to pay only 7 p w
and
«ill be excluded trm unemployment and temporary disability benefits*
3
**
1* Old Age* Survivor*1 and Permanent Si ability Insurance
a) Estimated expenditures and receipts (k p$r oent of the total of £2
per cent) under the esspaaaeci eystem are again shown in fable I* They
show substantially larger receipts (up to# esy 1950) than under the
pre sent syatem but also wry much larger benefit payments* Shut pay*
assents for 1950 *would be #1»700 million cr three times a* large as
under the present system* Receipts trill eseeed expenditures until
about I960* from then on they will be lege and a subsidy idll be
needed* fhis deficiency of receiptb could be made up by dressing on
the fund until the s&d<*1970*a»
b) A# shown in fable I the $rust fund *&11 continue to increase until
about 1960# at isMch time it ie estiiaated to re^ach $27 billion, aa
against $36 billion under the present plant For the fir at five yeare
the rate of increase wuld be faster than under present lasr* but from
then on at a considerably slower rate* Unlike the present plan the
fund T&ll decline from then on if the excess of benefits over receipt*
is financed by drawing on the fund*
2m Unemployment, Temporary l&aability and Maternity Insurance
Estimated expenditures from 19^5 on are $2*200 million per annum
through I960* {depending of course on employment conditions), while esti~
mated reoelpti are close to |2#800 million *> an excess of receipts over expendituree el: about $200 E&llion per year* On these assumptions* the fund jnay
be essjteotod to increase from its present level of over $6 billion tn $12
billion in i960*
3* Hospitalisation and Medical tore
Ihe receipt* fromfrper cent out of the total 12 per cent payroll
taxes are estimated to finance these benefits on a pay-as-you-go basis*
XXX* Inflationary and Deflationary Impact of Present Social Security plan
asd
f Qr the year 1953T
Research people at the Social security Board have estimated the im*
pact of the two plana on consular expenditures to be ae follows*
Of
Hational
Jnoos^e
latesb of benefit
Bxceee of payroll
Increase or Dopay&ente oror pay*
receipt* over bene-* crease in Con«iajap^
roll receipts
fit payments
tion espendituree
~
"
' "(Million®'of hollars')
* "
Present L&w
165,000
1^0,000
105#000
0
0
600
2,000
600
0
• 1*879
** I4IU
•
692
Wagmr^lturray^Slngell Bill
165,000
Hi0,000
105,000
0
0
1,800
h*20Q
1*2400
0
« 2,519
lU
• 2,575
Jhe table indicate* that under the new till th© contribution of Social
Security to the Icnrel of conmm&r expenditures would bo substantially greater
at depression level0 of Income, than under present law* But, similarly, the
reverse effect irould be substantially larger at high level* of income* t*
iiaprove the not result, the expanded benefit program must bo combined not irilth
the increased payroll ta^ees but an ^mediate and substantial contribution
financed out of the gowrauent budget and paid for trm a progressive tax
atruoture* In the British and German Social Security systems such a oontri^
but!on has been made for isasy yeara*
Table I
Old Aga and SurviTors Insurance
(la ailllon dollars)
Ssceipta
GSHIOII'* .
dm*
Tear
Payroll
Interest
fotftl
Bona fit
Payments
&XQ&88 over Sensfita
1
oft
i
Receipts |?otAl Receipt^
fruet Fund
Present Prograa l/
1&5
1950
I960
1970
i960
2000
* 1,336
2,166
2,*<1+S
2,676
2,892
3,336
316
696
1,070
1,1*06
2,036
3*7k&
L293
5,572
' 233
589
1,252
1,913
2,73&
3,539
S 1,103
1.577
1,196
763
158
-203
#
1.255
1,893
1,892
1,855
1,5&
1,855
\ 8.200
16,700
55,800
71,100
102,700
Proposed Program *» Wagner Bill 2/
%5
2,700
2000
3,075
3*516
5,690
3.823
3,909
A950
I960
1970
i960
136
325
50U
476
358
0
2,836
%k00
lt« 020
4,166
4,181
3,909
32?
1.71k
,876
.,892
5.9U3
7,975
2,380
1,361
360
1,202
£,120
14,066
2,516
1,686
%
8,l£7
18fii22
27,226
25,3^
* 1,762
- U,066
18,622
12,119
"BHlmtes prepared by Social security Board, Offi oe of the Actuary
Include* pemanenfc J& ©ability insurance* Roughly comparable e ctiiaate s, prepared
by tfte tax Foundation, Hew York City
KBMT » R6H
12/5AU
@FedFRASER