Appendix K to the report of the 1983 Greenspan Commission on Social Security Reform
Appendix K- Section B
SUMMARY OF SECTION B - TAX RATES |
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OASDI Cost 1983-89 |
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Option No. |
Description |
II-B |
III |
Long-Term Cost |
B-1 |
Accelerate the 1990 OASDI tax to 1984. | -$133 |
-$135 |
-.09 |
B-2 |
Accelerate the 1985 OASDI tax to 1984. | -10 |
-10 |
-.01 |
B-3 |
Accelerate the 1985 and 1986 OASDI-HI tax rates to 1984. | -19 |
-18 |
-.02 |
B-4 |
Increase the OASDI-HI tax rate for self-employed persons to the combined employer-employee rate. | -18 |
-17 |
-.19 |
B-5 |
Reduce the 1990 OASDI tax rate from 6.2% to 6.0% for 1990-2009. | 0 |
0 |
+.11 |
B-6 |
Move the 1985 OASDI tax rate to 1984; for 1985-87, such rate would be mid-way between the 1985 and 1990 tax rates in present law; for 1988 and after, such rate would be the 1990 rate in present law. | -86 |
-89 |
-.05 |
B-7 |
Increase the OASDI tax rate on employers and employees each by 1% in 2020. | 0 |
0 |
-.99 |
B-8 |
Increase the OASDI tax rate on employers and employees each by 1.25% in 2030. | 0 |
0 |
-.90 |
B-9 |
Remove the taxable earnings base for employers only. | -41 |
-42 |
-.56 |
B-10 |
Set a limit of 25% of total compensation as to the amount of fringe benefits not subject to payroll tax. Tax-exempt fringes in excess of such limit would -be subject to OASDI-HI tax on only the employer and would not be counted as creditable wages for benefit purposes. | n.a. |
n.a. |
-.73 |
B-11 |
Maintain a constant OASDI tax rate on total compensation, effective 1990. | 0 |
0 |
-1.56 |
B-12 |
Make wages deferred under Section 401(k) (salary reduction plans) be subject to OASDI-HI tax. | n.a. |
n.a. |
n.a. |
B. TAX RATES
Present law. See Table 2 for schedule of OASDI-HI tax rates under present law.
Options.
B-1 Accelerate the 1990 OASDI tax rate to 1984.*
Costs (in billions of dollars)*** |
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Estimate |
1983 |
1984 |
1985 |
1986 |
1987 |
1988 |
1989 |
1983-89 |
II-B |
0 |
-25.1 |
-18.7 |
-19.7 |
-21.3 |
-23.1 |
-24.9 |
-132.8 |
III |
0 |
-24.3 |
-18.4 |
-19.8 |
-21.8 |
-24.1 |
-26.4 |
-134.8 |
25-Year Cost: -.26% of taxable payroll
50-Year Cost: -.13% of taxable payroll
Long-Term Cost: -.09% of taxable payroll
B-2 Accelerate the 1985 OASDI tax rate to 1984.
Costs (in billions of dollars)*** |
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Estimate |
1983 |
1984 |
1985 |
1986 |
1987 |
1988 |
1989 |
1983-89 |
II-B |
0 |
-9.4 |
-.6 |
0 |
0 |
0 |
0 |
-10.0 |
III |
0 |
-9.1 |
-.6 |
0 |
0 |
0 |
0 |
-9.7 |
25-Year Cost: -.02% of taxable payroll
50-Year Cost: -.01% of taxable payroll
Long-Term Cost: -.01% of taxable payroll
* In conjunction with this proposal, a portion of the OASDI-HI tax could be made deductible for income-tax purposes or a tax credit provided -- the portion would be such that the reduction in personal income taxes would equal the additional OASDI-HI taxes paid by workers and employers. Thus, there would be no effect on the overall Federal budget deficit.
B-3 Accelerate the 1985 and 1986 OASDI-HI tax rates to 1984.**
Costs (in billions of dollars) |
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Estimate |
1983 |
1984 |
1985 |
1986 |
1987 |
1988 |
1989 |
1983-89 |
II-B, OASDI |
0 |
-9.4 |
-.6 |
0 |
0 |
0 |
0 |
-10.0 |
| III, OASDI | 0 |
-9.1 |
-.6 |
0 |
0 |
0 |
0 |
-9.7 |
| II-B, HI | 0 |
-4.9 |
-3.8 |
-.2 |
0 |
0 |
0 |
-8.8 |
| III, HI | 0 |
-4.7 |
-3.8 |
-.2 |
0 |
0 |
0 |
-8.7 |
25-Year Cost, OASDI: -.02% of taxable payroll
50-Year Cost, OASDI: -.01% of taxable payroll
Long-Term Cost, OASDI: -.01% of taxable payroll
25-Year Cost, HI: -.02% of taxable payroll
B-4 Increase the OASDI-HI tax rate for self-employed persons to the combined employer-employee rate, effective in 1984.***
Costs (in billions of dollars) |
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Estimate |
1983 |
1984 |
1985 |
1986 |
1987 |
1988 |
1989 |
1983-89 |
II-B, OASDI |
0 |
-.9 |
-2.8 |
-3.1 |
-3.4 |
-3.6 |
-3.8 |
-17.5 |
| III, OASDI | 0 |
-.8 |
-2.6 |
-3.0 |
-3.3 |
-3.6 |
-3.9 |
-17.3 |
| II-B, HI | 0 |
-.4 |
-1.3 |
-1.5 |
-1.7 |
-1.8 |
-2.0 |
-8.7 |
| III, HI | 0 |
-.4 |
-1.2 |
-1.5 |
-1.7 |
-1.8 |
-2.0 |
-8.6 |
25-Year Cost, OASDI: -.15% of taxable payroll
50-Year Cost, OASDI: -.17% of taxable payroll
Long-Term Cost, OASDI: -.19X of taxable payroll
25-Year Cost, HI: -.14% of taxable payroll
** The figures shown assume that the taxes resulting from the 1986 increase in the HI portion of the tax rate would go into the HI Trust Fund. It would be possible to keep the HI tax rate under the proposal at the same level in 1984-85 as under present law and to reallocate the increase in the OASDI-H1 rate entirely to the OASDI Trust Funds; then, the cost effect for the OASDI Trust Funds would be approximately the sum of the figures shown for OASDI and HI.
*** In conjunction with this proposal, a refundable tax credit for the selfemployed equal to 25% of the self-employment tax could be provided. Alternatively, 50% of the payroll tax paid by the self-employed could be made tax deductible as a business expense.
B-5 Reduce the 1990 OASDI tax rate from 6.2% on the employer and employee, each, to 6.0% for 1990-2009. Return to the 6.2% rate in 2010.
25-Year Cost: +.27% of taxable payroll
50-Year Cost: +.16% of taxable payroll
Long-Term Cost: +.ll% of taxable payroll
B-6 Move the 1985 OASDI tax rate to 1984; increase the 1985-87 OASDI tax rate to mid-way between the 1985 and 1990 tax rates in present law; and for 1988 and after, increase the OASDI tax rate to the tax rate for 1990 in present law.
Costs (in billions of dollars)*** |
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Estimate |
1983 |
1984 |
1985 |
1986 |
1987 |
1988 |
1989 |
1983-89 |
II-B |
0 |
-9.4 |
-9.1 |
-9.8 |
-10.7 |
-22.5 |
-24.9 |
-86.4 |
III |
0 |
-9.1 |
-9.0 |
-9.9 |
-10.9 |
-23.4 |
-26.4 |
-88.7 |
25-Year Cost: -.16% of taxable payroll
50-Year Cost: -.08% of taxable payroll
Long-Term Cost: -.05% of taxable payroll
B-7 Increase OASDI tax by 1% on employers and employees each, effective in 2020.
Long-Term Cost: -.99% of taxable payroll
B-8 Increase OASDI tax rate by 1.25X on employers and employees each, effective in 2030.
Long-Term Cost: -.90% of taxable payroll
B-9 Remove the taxable earnings base for employers only, effective in 1984.
Costs (in billions of dollars) |
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Estimate |
1983 |
1984 |
1985 |
1986 |
1987 |
1988 |
1989 |
1983-89 |
II-B, OASDI |
0 |
-5.9 |
-6.7 |
-6.8 |
-7.0 |
-7.2 |
-7.3 |
-40.9 |
| III, OASDI | 0 |
-5.8 |
-6.7 |
-6.8 |
-7.2 |
-7.5 |
-7.6 |
-41.6 |
| II-B, HI | 0 |
-1.5 |
-1.6 |
-1.8 |
-1.8 |
-1.9 |
-1.9 |
-10.5 |
| III, HI | 0 |
-1.5 |
-1.6 |
-1.8 |
-1.8 |
-2.0 |
-2.0 |
-10.7 |
25-Year Cost, OASDI: -.43% of taxable payroll
50-Year Cost, OASDI: -.50% of taxable payroll
Long-Term Cost, OASDI: -.56% of taxable payroll
25-Year Cost, HI:
B-10 Set a limit of 25% of total compensation as the amount of non-taxable fringe-benefit compensation that can be provided without being subject to the payroll tax. Tax-exempt fringes in excess of the 25% limit would become subject to OASDI-HI tax only for the employer and would not be counted as creditable wages for benefit purposes, effective in 1985.
Costs (in billions of dollars) |
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Estimate |
1983 |
1984 |
1985 |
1986 |
1987 |
1988 |
1989 |
1983-89 |
II-B, OASDI |
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| III, OASDI | ||||||||
| II-B, HI |
|
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| III, HI |
|
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25-Year Cost, OASDI: -.07% of taxable payroll
50-Year Cost, OASDI: -.32% of taxable payroll
Long-Term Cost, OASDI: -.73% of taxable payroll
25-Year Cost, H:
B-11 Maintain, in effect, constant OASDI tax rate on total compensation, effective in 1990. If the "cash earnings plus taxable fringe benefits" portion of total compensation decreases, the tax rate on covered wages would increase so as to maintain a constant tax rate on total compensation, using 1990 as the base year.
25-Year Cost: -.25% of taxable payroll
50-Year Cost: -.87% of taxable payroll
Long-Term Cost: -1.56% of taxable payroll
B-12 Make wages deferred under Section 401(k) of the Internal Revenue Code (salary reduction plans) be subject to the OASDI-HI tax.
Long-Term Cost: Cannot be estimated, because no experience data are available. However, the loss of revenues to the OASDI and HI Trust Funds, without this change, may become substantial in future years.