Medicare trustees have released their annual report announcing that Medicare is running out of money.
But one fix isn’t that complicated. We would simply need to raise the Medicare payroll tax rates. However, there are challenges to consider.
The first lesson is that, as with Social Security, the tax burden keeps rising. Social Security taxes started at 2% combined employer and employee. Today, they stand at over 12%. We simply cannot trust political projections of costs. It probably is true that we can wring a bit more tax revenue out of the system. We could ding the rich even more, or crack down on tax evasion, or sort out the corporate tax code.
And yet, we have a number of unfunded promises coming down the pike. How much is it going to cost to sort those out? How much are the tax rises going to have to be in order to fully fund Medicare, Medicaid, sort out Social Security again? Or to bail out those states going bust from their pensions obligations and on and on? Only once we’ve worked all that out can we possibly see what’s left in tax raising capacity.
Top line: yes, there is more tax that can be wrung out of us. But the political system has already spent most of the available proceeds and more on projects that the bills are yet to arrive for.
