Last week the debt clock clicked over 16 Trillion, to great wails of consternation and gnashing of teeth. Not mentioned in the coverage of that event, however, is the fact that the unfunded liability for all of our “entitlement” programs (Social Security, Medicare, Medicaid, and a host of lesser programs including food stamps and aid for dependent children) amounts to nearly 62 Trillion. In other words, someone (read politicians) has signed a promissory note on the behalf of each household for $528,000 not even counting a share of the national debt.
Today there are only 3 people paying into Social Security for each person drawing benefits. That ratio will dwindle to 2 to 1 over the next 50 years. Since Social Security has been grossly underfunded, honoring the defined benefits of Baby Boomer retirees will also require back-breaking additional payroll tax4 on future workers.
Enter the FairTax……………….
From HR25, Sec 101. Imposition of Sales Tax
`(3) COMBINED FEDERAL TAX RATE PERCENTAGE- The combined Federal tax rate percentage is the sum of--
`(A) the general revenue rate (as defined in paragraph (4),
`(B) the old-age, survivors and disability insurance rate, and
`(C) the hospital insurance rate.
`(4) GENERAL REVENUE RATE- The general revenue rate shall be 14.91 percent.
At least until Congress screws it up again, 8.09% of the revenue will be dedicated to Medicare and Social Security. No longer will the trust fund be raided for the general revenue. The fund becomes sacrosanct for the first time since the Johnson Administration. Additionally, the FairTax will at least double the contributory base.
When Daddy Warbucks buys a new yacht, he will contribute. When Johnny ponies up a dollar for a can of pop, he will also contribute to Grandad’s retirement. For that matter it is highly likely Grandad will also be a contributor to his own benefits.
The dismal prospect of Boomermegeddon will give way to a more hopeful future under the FairTax where the ever expanding economic pie will make it possible for all segments of society to get a bigger piece, not the least of which will be those dependent on fully funded entitlements.