ESTIMATE OF TOTAL FEDERAL TAX BURDEN ON WORKERS

©1998 Larsen

The assumptions are based of the Social Security Administration's published data for 1997 for OASI and DI income and worker to retiree ratios. The high worker ratio used here is due to the fact OASI is currently at one retiree for every 4.16 workers and disability is at 24 workers for every recipient of DI benefits. The combined ratio is some where around 3.3 workers per OASI and DI recipient.

The assumptions for calculating OASI tax rate required to fund OASI in the future assumes there is no change to the formula for calculating benefits Economic Growth and Benefits. The basis was made based on the ratio of workers times the tax rate minus the current surplus per worker to determine the average benefit per retiree. Assuming the formula does not change, the average benefit will not decrease. This assumes the best case for OASI

The assumption of calculating the DI tax rate is done by sum total of DI revenues minus the current DI surplus divided by the recipients in 1997. Assuming the average benefit paid will be the same ratio in the future to average wages, the calculation is correct. The worker to recipient ratio is kept at 22 and not projected to differ.

Medicare was calculated using the cost in 1997 and dividing it by the number of recipients. Medicare is paid out of two funds. The MI fund paid at the rate of 2.9% on all wages and the rest out of general revenues. The current medicare program is running cash negative. Therefore, the current cost of medical A is known by dividing revenue by recipients. Assuming the same cost of part A for future retirees, the tax rate is easily calculated.

The portion of Medicare Part B paid of general revenue was calculated by dividing the cost by the number of recipients to get the cost per person. Assuming the cost per person does not change, the tax rate on the current workers can be determined.

The general tax rate to pay all other funds can be calculated by subtracting out Social Security costs and dividing it by the number of tax payers. Again the this assumes no change in the cost of the general expenses per citizen.

The worker ratio was extracted from a program using the United State Census number on population and determining who is a potential worker and who is a potential retiree based on age.

The accuracy of the calculation is probably well within +/-5%. This calculation most likely underestimates the true cost of medicare. The question becomes when will the tax revolt begin?

	POTENTIAL TAX RATES BY PROGRAM
WORKER TO RETIREE RATIO	OASI	DI	MEDICARE	MEDICARE PAID OUT OF GENERAL REVENUE	FEDERAL	TOTAL TAX BURDEN ON WORKER	YEAR ACHIEVED
4.16	9.69%	1.66%	2.90%	1.95%	26.14%	42.33%	1998
4.10	9.83%	1.74%	2.94%	1.98%	26.52%	43.00%	2011
4.00	10.07%	1.81%	3.02%	2.02%	27.18%	44.11%	2013
3.90	10.33%	1.90%	3.09%	2.08%	27.88%	45.28%	2014
3.80	10.60%	1.90%	3.17%	2.13%	28.61%	46.42%	2015
3.70	10.89%	1.90%	3.26%	2.19%	29.39%	47.63%	2016
3.60	11.19%	1.90%	3.35%	2.25%	30.20%	48.90%	2017
3.50	11.51%	1.90%	3.45%	2.31%	31.07%	50.24%	2018
3.40	11.85%	1.90%	3.55%	2.38%	31.98%	51.66%	2019
3.30	12.21%	1.90%	3.66%	2.45%	32.95%	53.17%	2020
3.20	12.59%	1.90%	3.77%	2.53%	33.98%	54.77%	2021
3.10	13.00%	1.90%	3.89%	2.61%	35.07%	56.48%	2022
3.00	13.43%	1.90%	4.02%	2.70%	36.24%	58.30%	2023
2.90	13.89%	1.90%	4.16%	2.79%	37.49%	60.24%	2024
2.80	14.39%	1.90%	4.31%	2.89%	38.83%	62.32%	2025
2.70	14.92%	1.90%	4.47%	3.00%	40.27%	64.56%	2026
2.60	15.50%	1.90%	4.64%	3.11%	41.82%	66.97%	2028
2.50	16.12%	1.90%	4.83%	3.24%	43.49%	69.57%	2030
2.40	16.79%	1.90%	5.03%	3.37%	45.30%	72.39%	2032
2.30	17.52%	1.90%	5.25%	3.52%	47.27%	75.46%	2036
2.20	18.31%	1.90%	5.48%	3.68%	49.42%	78.80%	2046
2.10	19.19%	1.90%	5.74%	3.86%	51.78%	82.46%	2053
2.00	20.15%	1.90%	6.03%	4.05%	54.37%	86.49%	2061
1.90	21.21%	1.90%	6.35%	4.26%	57.23%	90.94%	2071