This past week the Senate Finance Committee held hearings about two important issues,  Choosing to Work During Retirement and the Impact on Social Security and The Future of Individual Tax Rates: Effects on Economic Growth and Distribution.

Here is some of the testimony from the 'Work During Retirement issue from Stephen C. Goss, Chief Actuary of the Social Security Administration:

Scenario 1: Increase Work at Age 62 and Older by 10 Percent
... labor force participation has declined generally for men and has risen for women since 1950 and 1970. Under the Trustees intermediate assumptions, participation rates are projected to rise in the future at age 65 and older, on an age adjusted basis, to levels closer to those experienced back in 1970 for males and to double the rates from 1970 for females.

Under this scenario, we consider the effect of an additional 10-percent rise in labor force participation at ages 62 and older becoming effective by 2011. We estimate that an increase at this level would add about 1.3 percent to the taxable earnings for the Social Security program. The additional revenue would be partially offset by additional benefits earned by some workers gaining insured status, and others having increased average career earnings levels. An increase on this order would improve the long-range OASDI actuarial deficit, reducing it from the 2.00 percent of taxable payroll estimated under current law by about 0.09 percent, to a deficit of 1.91 percent of payroll. The trust fund exhaustion date would be extended by one year, from 2037 to 2038. The annual deficit in the 75th projection year would also be reduced by 0.09 percent of taxable payroll.

Scenario 2: Increase Labor Force Participation to the 1950 Male Rates, Unadjusted

Under this hypothetical scenario, labor force participation at ages 45 and older would rise by 2011 for both men and women to the rates experienced in 1950 by men alone. This would clearly be a dramatic increase in overall employment above current and projected levels. The assumed increases in labor force participation do not reflect the availability of disability benefits under the Social Security program, which started in 1957, or the increasing average age of the group age 65 and older.

Overall, this scenario would imply an increase in Social Security taxable earnings of about 16.5 percent over projected levels. The additional revenue would be partially offset by additional benefits earned by some workers gaining insured status, and others having increased average career-earnings levels. An increase on this order would improve the long-range OASDI actuarial deficit, reducing it from the 2.00 percent of taxable payroll estimated under current law by about 0.98 percent, to a deficit of 1.02 percent of payroll. The trust fund exhaustion date would be extended by 18 years, from 2037 to 2055. The annual deficit in the 75th projection year would be reduced by 0.54 percent of taxable payroll.

Scenario 3: Increase Labor Force Participation to the 1950 Male Rates, Adjusted

Under this hypothetical scenario, labor force participation at ages 45 and older would rise by 2011 for both men and women to the rates experienced in 1950 by men alone. However, the assumed increases in labor force participation here reflect the availability of disability benefits under the Social Security program, which started in 1957, and the increasing average age of the group age 65 and older. For individuals projected to be receiving disabled worker benefits in the future at ages 45 to 66, the assumed increase in labor force participation is assumed to be half as large as the general increase implied by a return to 1950 male rates. In addition, labor force participation over age 65 is here assumed to be at 1950 rates on an age-specific basis so that rates for the entire age group 65 and older would tend to decline somewhat as the average age for the group increases.

The second hearing, The Future of Individual Tax Rates: Effects on Economic Growth and Distribution, relates to the now end-of-the-year expiring 'Bush Tax Rates' initiated in 2001. What follows is the Committee Chairman's press release that followed the hearings:

Senate Finance Committee Chairman Max Baucus (D-Mont.) examined legislative strategies for extending middle-class tax cuts in light of the impending expiration of tax policies enacted in 2001 and 2003 at a committee hearing he convened today.

“Americans are struggling to make ends meet, and we need to do all we can to put more money back in the hands of workers, middle-class families and small businesses so our economy can grow,” Baucus said. “I support extending the middle-class tax cuts permanently, as soon as possible, so working families can keep more of their hard-earned money.”

During today’s hearing, Baucus examined the impacts of the 2001-2003 tax rates on the distribution of income and economic growth, with particular attention to the effects of the policies on middle-class Americans, small businesses and the national debt.  Baucus questioned expert economists and tax practitioners as to the best legislative approach moving forward to address the budget deficit responsibly, while continuing to spur economic recovery through tax cuts for middle-class Americans and small businesses.

Baucus pressed witnesses on the need to ensure that tax rate cuts intended to benefit small businesses really do benefit small businesses and not a small number of extremely wealthy individuals receiving income from large businesses.  He similarly stressed a focus on the middle-class with regard to individual tax rates and noted the importance of ensuring tax cuts are equitably distributed and designed to benefit these workers and families.

Baucus also discussed the need to address the tax provisions set to expire this year in a manner that will compliment the comprehensive tax reform that is needed over the long-term to make the entire tax code work more fairly and simply and for American taxpayers and the federal budget.

The two major pieces of tax legislation set to expire at the end of 2010 are  the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA).  Baucus expressed the committee’s commitment to continued work to address the impending expiration of these bills and provide the certainty taxpayers need to plan their financial futures.

Watch Finance Committee hearings and view witness testimony at:
http://finance.senate.gov/hearings/.

Did you know about your possibility to include a public statement that could be made part of the Finance Committe hearing record? You have two weeks to have them included after the hearing.

"Any individual or organization wanting to present their views for inclusion in the hearing record should submit a typewritten, single-spaced statement, not exceeding 10 pages in length. Title and date of the hearing, and the full name and address of the individual or organization must appear on the first page of the statement. Statements must be received no later than two weeks following the conclusion of the hearing."

Statements should be mailed (not faxed) to:

Senate Committee on Finance
Attn. Editorial and Document Section
Rm. SD-219
Dirksen Senate Office Bldg.
Washington, DC 20510-6200