Doubling Down and Double-Counting

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So how did Social Security get tied up in health care reform? It’s kind of complicated so stay with me.

The Senate version of the health care reform bill that the House is supposed to vote on this week–um, let me correct. Despite weeks of Democrats calling for an “up or down vote,” the House isn’t actually going to vote on the bill. It’s going to vote on amendments to the bill and, if they pass, the Senate version will be “deemed” to have passed–without an actual vote on the bill.

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Anyway, in the Senate bill is the “Cadillac tax” that makes employer-provided health insurance subject to taxation above a certain level. That means that employees with high-cost health insurance will, at some point after 2018, start paying more taxes–including Social Security taxes.

The Congressional Budget Office included those additional taxes in its off-budget estimate–a total of about $53 billion–of the cost and revenue from the health care bill.

Those additional funds will make Social Security appear to be more financially solvent. But the government borrows every last dime that isn’t paid out currently, issues itself special, nonnegotiable IOUs, and then uses the money to offset its current budget deficit. It’s all a slight of hand to make you think members of Congress aren’t the big spenders they really are.

But wait, there’s a problem. The Associated Press points out that by the end of this fiscal year in September, Social Security is expected to pay out $706 billion in benefits but only collect $677 billion–for a net loss of $29 billion.

That means that the government will have to start drawing down those “specials”–if there were any money there. Since there isn’t, the money will have to come out of revenues or, almost certainly, the government will have to borrow it.

But wait, you can’t claim that the additional Social Security payroll taxes both reduce the total cost of Obamacare and be used to pay Social Security benefits, which they will have to do if the government is paying out more than it’s taking in. It’s double-counting–the same kind of double-counting the Democrats are doing with Medicare. And someone has to point that out.

‘Today’s TaxByte was written by IPI Resident Scholar Dr. Merrill Matthews.’

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