IRS Commissioner’s Annual Report Released

It contains some interesting and useful information.

Church Law and Tax 1991-09-01 Recent Developments

Social Security

The 1991 Annual Report of the Social Security Board of Trustees has been released, and it contains some useful information. Consider the following: (1) In releasing the report, Health and Human Services Secretary Louis Sullivan stated: “In the social security trust funds, current projections indicate continued substantial growth over the next several decades, helping to ensure that social security can meet its financial commitments in the next century when today’s younger workers become eligible for social security.” However, Secretary Sullivan added “we are confronting bankruptcy in the primary medicare trust fund within 14 years unless we take effective action to change the situation.” The report itself states: “There are currently over four covered workers supporting each [medicare] enrollee. This ratio will begin to decline rapidly early in the next century. By the middle of that century, there will be only about two covered workers supporting each enrollee …. Not only are the anticipated reserves and financing of the [medicare] program inadequate to offset this demographic change, but under all but the most optimistic assumptions, the [medicare] trust fund is projected to become exhausted even before the major demographic shift begins to occur. Exhaustion is projected to occur shortly after the turn of the century, in 2005 under the [most likely] assumptions, and could occur as early as 2001 if the pessimistic assumptions are realized.” On the other hand, the report indicates that the “old age, survivors, and disability” trust funds are expected to increase for the next 25 years, and then decline until the funds are exhausted in the year 2041. Since social security will be able to pay old age, survivors, and disability income obligations for the next 50 years (through 2041), the report does not call for an increase in social security taxes for now. (2) Projected maximum earnings subject to FICA and self-employment taxes are $55,800 for 1992; $57,900 for 1993; $60,900 for 1994; $64,200 for 1995; and $67,500 for 1996. These figures are released to assist taxpayers with financial planning and budgeting. Maximum wages subject to the medicare portion of FICA taxes are expected to rise to $130,800 for 1992. (3) Inflation will boost social security benefits by 4.8% for 1991, and an additional 4% for each of the next five years. (4) The “annual earnings test (the amount social security recipients from 65 to 70 years of age can earn without any reduction in benefits) is expected to increase to $10,200 in 1992; $10,560 for 1993; $11,160 for 1994; $11,760 for 1995; and $12,360 for 1996. The annual earnings test for social security recipients from 62 to 65 years of age is expected to increase to $7,440 for 1992; $7,680 for 1993; $8,040 for 1994; $8,520 for 1995; and $9,000 for 1996. (5) Social security tax rates will remain at 15.3% for both FICA and self-employment purposes for now. Congress would have to approve any further increase in social security taxes, and there is no proposal pending. Next year is an election year, so there will be no tax hikes then either.

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