New deficit plan would cut social security, veterans benefits and increase taxes for most families

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Tue Nov-08-11 12:27 PM
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New deficit plan would cut social security, veterans benefits and increase taxes for most families

New Social Security formula would cut benefits, raise taxes
BY STEPHEN OHLEMACHER
ASSOCIATED PRESS
November 8, 2011

Just as 55 million Social Security recipients are about to get their first benefit increase in three years, Congress is looking at reducing future raises by adopting a new measure of inflation that also would increase taxes for most families. Those with low incomes would be hit hardest.

If adopted across the government, the inflation measure would have widespread ramifications. Increases in veterans' benefits and pensions for federal workers and military personnel would be smaller. And over time, fewer people would qualify for Medicaid, Head Start, food stamps, school lunch programs and home heating assistance than under the current measure.

Taxes would go up by $60 billion during the next decade because annual adjustments to the tax brackets would be smaller, resulting in more people jumping into higher tax brackets because their wages rose faster than the new measure. Annual increases in the standard deduction and personal exemptions would become smaller.

The proposal to adopt a new Consumer Price Index was floated by the Obama administration during deficit reduction talks in the summer. Now, it is one of the few options supported by both Democratic and Republican members of a joint super committee in Congress working to reduce government borrowing.

Read the full article at:

http://www.freep.com/article/20111108/NEWS07/111080330/New-Social-Security-formula-would-cut-benefits-raise-taxes

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New formula could cut future benefits, raise taxes
November 7, 2011

Despite fierce opposition from seniors groups, the proposal is gaining momentum in part because it would let policymakers gradually cut benefits and increase taxes in a way that might not be readily apparent to most Americans. Changes at first would be small -- the Social Security increase would be cut by just a few dollars in the first year.

In all, adopting the chained CPI would reduce Social Security benefits by $112 billion over the next decade. Federal civilian and military pensions would be $24 billion lower, according to the nonpartisan Congressional Budget Office.

The tax increases would hit low-income families the hardest, while high-income taxpayers would see smaller changes. The wealthiest taxpayers already pay taxes at the highest marginal rate, currently 35 percent.

For example, by 2021, taxpayers making between $10,000 and $20,000 would see a 14.5 percent increase in their federal taxes with a chained CPI, according to an analysis by the Joint Committee on Taxation. Taxpayers making more than $1 million would get a tax increase of 0.1 percent.

Read the full article at:

http://www.businessweek.com/ap/financialnews/D9QS35RG0.htm