SocSecMeanTest

SocSecMeanTest - The Potential Savings to Social Security...

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The Potential Savings to Social Security from Means Testing Dean Baker and Hye Jin Rho March 2011 Center for Economic and Policy Research 1611 Connecticut Avenue, NW, Suite 400 Washington, D.C. 20009 202 293 5380 www.cepr.net
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CEPR The Potential Savings to Social Security from Means Testing z i Contents Executive Summary. .......................................................................................................................................... 1 Introduction. ....................................................................................................................................................... 3 The Distribution of Social Security Benefits by Income . ............................................................................ 3 Means Testing Medicare . ................................................................................................................................ 12 The Rationale for Means Tests. ..................................................................................................................... 13 Conclusion . ....................................................................................................................................................... 13 Appendix. .......................................................................................................................................................... 14 About the Author Dean Baker is an economist and Co-Director of the Center for Economic and Policy Research, in Washington, D.C. Hye Jin Rho is a Research Assistant at CEPR. Acknowledgments Alan Barber, John Schmitt, and Nicole Woo gave helpful comments on earlier drafts of this paper.
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CEPR The Potential Savings to Social Security from Means Testing z 1 Executive Summary Many people in policy debates have argued that means testing, or reducing Social Security payments to affluent beneficiaries, can be an effective way to save money for the program and to reduce the federal budget deficit. This paper examines the feasibility of saving money through various types of means tests. It shows: The vast majority of Social Security benefits go to relatively low and middle class people. More than 75 percent of benefits go to individuals with non-Social Security incomes of less than $20,000 a year. More than 90 percent of benefits go to individuals with non-Social Security incomes of less than $50,000 a year. A means test that phased out benefits at the rate of 10 cents for each dollar of additional income over $40,000 of non-Social Security income would save the program 2.77 percent of annual benefits, assuming no behavioral response. It would save 0.74 percent if the floor for the means test were set at $100,000. After accounting for the lost tax on these benefits, the savings for the two means tests would be 2.18 percent and 0.58 percent of benefits, respectively. A means test that phased out benefits at the rate of 20 cents for each dollar of additional
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This note was uploaded on 01/18/2012 for the course PADP 8670 taught by Professor Staff during the Fall '10 term at UGA.

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SocSecMeanTest - The Potential Savings to Social Security...

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