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CRS — Mandatory Spending Since 1962 (March 18, 2015)

March 25, 2015 Comments off

Mandatory Spending Since 1962 (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

Federal spending is divided into three broad categories: discretionary spending, mandatory spending, and net interest. Mandatory spending is composed of budget outlays controlled by laws other than appropriation acts, including federal spending on entitlement programs. Entitlement programs such as Social Security and Medicare make up the bulk of mandatory spending. Other mandatory spending programs include Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), unemployment insurance, some veterans’ benefits, federal employee retirement and disability, and Supplemental Nutrition Assistance Program (SNAP). In contrast to mandatory spending, discretionary spending is provided and controlled through appropriations acts. Net interest spending is the government’s interest payments on debt held by the public, offset by interest income that the government receives.

The Power of the Purse: The Contributions of Hispanics to America’s Spending Power and Tax Revenues in 2013

March 3, 2015 Comments off

The Power of the Purse: The Contributions of Hispanics to America’s Spending Power and Tax Revenues in 2013
Source: Partnership for a New American Economy

The Partnership for a New American Economy’s new report, “The Power of the Purse: The Contributions of Hispanics to America’s Spending Power and Tax Revenues in 2013,” highlights the important role that both native and foreign-born Hispanics play as consumers and taxpayers, as well as their contributions to Medicare and Social Security programs.

Key findings include:

  • Hispanic households, both native and foreign-born, account for a large portion of America’s overall spending power. In 2013, Hispanics had an estimated after-tax income of more than $605 billion. That figure is equivalent to almost one out of every 
10 dollars of disposable income held in the United States that year. Foreign-born Hispanic households made up a sizeable portion of that figure: We estimate their spending power totaled $287 billion that year.
  • The growing earnings of Hispanic households have made them major contributors to U.S. tax revenue. In 2013, Hispanic households contributed more than $190 billion to U.S. tax revenues as a whole, including almost $67 billion in state and local tax payments. Of this, foreign-born Hispanics contributed more than $86 billion in tax revenues nationwide. That included almost $32 billion in state and local taxes and more than $54 billion in taxes to the federal government.
  • In some states, Hispanics now account for a large percentage of spending power and tax revenues overall. In both Texas and California, Hispanic households had more than $100 billion in after-tax income in 2013, accounting for more than one of every five dollars available to spend in each state that year. In Arizona, a state with a rapidly growing Hispanic population, their earnings after taxes accounted for almost one-sixth of the spending power in the state. In Florida, Hispanics contributed more than one out of every six dollars in tax revenue paid by residents of the state.
  • Hispanics, and foreign-born Hispanics in particular, play an important role sustaining America’s Medicare and Social Security programs. In 2013, Hispanic households contributed more than $98 billion to Social Security and almost $23 billion to the Medicare’s core trust fund. Foreign-born Hispanics in particular contributed more than $46 billion to Social Security, while paying in more than $10 billion to the Medicare program. Past studies have indicated that in Medicare in particular, immigrants draw down far less than they put in to the trust fund each year, making such tax contributions particularly valuable.

The Effect of Rising Inequality on Social Security

February 27, 2015 Comments off

The Effect of Rising Inequality on Social Security
Source: Center for American Progress

The nation’s Social Security system has long been a bedrock of economic security, protecting nearly all American workers and their families in case of retirement, disability, or the death of a primary breadwinner. Some 239 million workers ages 20 and older are insured under the program. In 2013, Social Security provided benefits to 58 million people, including 41 million retirees and dependents of retirees, 6 million survivors of deceased workers, and 11 million disabled workers and dependents of disabled workers.

Over the past three decades, however, rising inequality has increasingly threatened the notion of shared economic security. Those at the top of the income spectrum have seen tremendous gains, while most Americans have watched their wages decline or stagnate amid rising costs. In the wake of the Great Recession, the top 1 percent of households captured roughly 76 percent of inflation-adjusted income gains between 2009 and 2013.

Much of the leap made by the very rich is attributable to nonwage forms of income such as capital gains, but huge disparities also persist when looking only at wages, which form the basis for Social Security tax revenues because payroll taxes only apply to wage income. In 2013, for example, the top 1 percent of earners took home about 12.9 percent of the nation’s total wage income in 2013—nearly as much as the share received by the entire bottom half of workers, who captured approximately 13.7 percent of wage income. This growing divide in wages—combined with the fact that wages in excess of the taxable maximum are exempt from payroll taxes—means that millionaire and billionaire earners stop contributing to Social Security early in the year, while the average worker contributes all year long. In 2015, individuals with wage incomes of $1,000,000 stop contributing on February 12; those with higher incomes stop contributing sooner.

Why Do SSI and SNAP Enrollments Rise in Good Economic Times and Bad?

February 25, 2015 Comments off

Why Do SSI and SNAP Enrollments Rise in Good Economic Times and Bad?
Source: Center for Retirement Research at Boston College

The number of participants in the Supplemental Security Income Program (SSI) and the Supplemental Nutrition Assistance Program (SNAP) skyrocketed during the Great Recession. But more surprising is that caseloads for both programs increased during the preceding expansion and during the nascent recovery period after the Great Recession. Using both administrative program data and the Survey of Income and Program Participation (SIPP), this project investigates the persistent growth in SSI and SNAP since 2000. Whereas the existing literature on program caseloads in the post-welfare reform era generally excludes the elderly from the analysis, this project is the first to investigate differences in elderly and non-elderly caseloads, allowing for differential responsiveness over time. Preliminary estimates suggest that the correlation between SSI and SNAP caseloads and economic well-being, and, separately, caseloads and health, grew stronger over this time. Coupled with a poverty rate that did not fall along with the unemployment rate, and with an increase in the share of the population reporting poor or fair health, these correlations helped lead to caseloads that remained roughly constant (SSI) or even increased (SNAP) during the most recent expansion, rather than falling as expected. The increases in caseloads stem both from increases in the entry rates among the newly eligible – particularly those in poor health – and from decreases in exit rates among low-income beneficiaries.

CRS — How Social Security Benefits Are Computed: In Brief (February 4, 2015)

February 20, 2015 Comments off

How Social Security Benefits Are Computed: In Brief (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

With about $900 billion in benefit outlays projected to be made in 2015, Social Security is the largest program in the federal budget. It provides monthly cash benefits to retired and disabled workers and their family members as well as to the family members of deceased workers. Currently, there are about 59 million beneficiaries. Under current law, Social Security’s revenues are projected to be insufficient to pay full scheduled benefits after 2033.

Monthly benefit amounts are determined by federal law. Social Security is an issue of ongoing interest both because of its role in supporting a large portion of the population and because of its long-term financial imbalance, and policy makers have considered numerous proposals to change its benefit computation rules.

The Social Security benefits that are paid to worker beneficiaries and to workers’ dependents and survivors are based on workers’ past earnings.

CBO — The Taxation of Social Security Benefits

February 18, 2015 Comments off

The Taxation of Social Security Benefits
Source: Congressional Budget Office

About 60 million people received Social Security benefits in 2014, CBO estimates. Up to 85 percent of a recipient’s benefits are subject to the individual income tax, depending on the recipient’s overall income. CBO estimates that income taxes on Social Security benefits totaled $51 billion in 2014, an amount that will be credited to the Social Security and Medicare trust funds after the tax returns for 2014 have been filed and analyzed. (CBO expects that those taxes will account for only about 4 percent of the tax revenues received by those trust funds, which receive the other 96 percent of their tax revenues from payroll taxes.)

About half of all Social Security beneficiaries owed some income tax on their benefits in 2014, CBO estimates. Of total Social Security benefits received last year, 6½ percent were owed in income taxes, with smaller percentages owed by many beneficiaries and much larger percentages owed by high-income beneficiaries. Because of legislation and changes in the economy, the share of benefits subject to tax has risen over the past several decades.

Like Social Security, defined benefit pensions typically augment retirees’ income by paying out specified benefits whose size is related to the retirees’ past earnings. However, the share of benefits that is taxed is generally smaller for Social Security than for defined benefit pensions. That difference is minimal for high-income taxpayers but large for low- and moderate-income taxpayers.
See also: Effect of Taxing Social Security Benefits by Income Class Estimated for Tax Year 2014

Lifetime Job Demands, Work Capacity at Older Ages, and Social Security Benefit Claiming Decisions

February 18, 2015 Comments off

Lifetime Job Demands, Work Capacity at Older Ages, and Social Security Benefit Claiming Decisions
Source: Center for Retirement Research at Boston College

We use Health and Retirement Study data linked to the Department of Labor’s O*Net classification system to examine the relationship between lifetime exposure to occupational demands and retirement behavior. We consistently found that both non-routine cognitive analytic and non-routine physical demands were associated with worse health, earlier labor force exit, and increased use of Social Security Disability Insurance. The growing share of workers in jobs with high levels of cognitive demand may contribute to growth in DI use.

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