By Merrill Matthews
Supreme Court Justice Antonin Scalia recently told a group of law school students last week that the federal government has the constitutional right to impose an income tax, “but if it reaches a certain point, perhaps you should revolt.”
Given how much younger workers have to pay in taxes and how little they can expect to get back, the real question is why they didn’t revolt years ago.
The U.S. government has become one big transfer-payment scheme from younger workers to older workers and retirees. As the Baby Boomers begin to retire, the Gen-Xers and especially Millennials will have to pay trillions of dollars in taxes to ensure the Boomers, the wealthiest generation in history, have a comfortable retirement. President Obama has only exacerbated the disparity.
Social Security — Very few Millennials believe Social Security will still be around when they retire, even though they paid into the program their entire working lives, and they might be right. Social Security’s trustees say the program can only pay about 75 cents on the dollar of promised benefits, starting in about 20 years. And that’s ONLY if you believe that $2.7 trillion in the Social Security Trust Fund represents real assets.
Congress could cut those benefits, but it would be political suicide because seniors vote. So the better guess is Congress will find some way to tax younger workers or borrow the money, which is essentially a tax on future workers’ earnings.
Medicare — The Medicare program is in even worse financial shape than Social Security. Its costs are rising faster than Social Security’s and there is only about $200 billion in the Medicare Trust Fund. Obamacare imposed two new Medicare taxes on high-income earners, but they won’t solve the problem. Medicare’s Office of the Actuary estimated last year that Medicare taxes will have to increase by 135 percent just to cover future hospital expenses.
Obamacare — If you are a Millennial and your health insurance premiums are going up, you can thank Obamacare. The Democrats decided to make you pay more so that older people, who typically have higher incomes, can pay less.
Federal Debt — According to the St. Louis Federal Reserve Bank, total federal debt is $17.4 trillion, up from $11.1 trillion when Obama took office. That’s a 54 percent increase in five years. And the Congressional Budget Office (CBO) predicts Obama’s recently proposed budget would add an extra $7.6 trillion in debt between 2015 and 2014.
That debt will have to be paid by the nation’s workers, which means that the Gen-Xers, but especially the Millennials, will be stuck with the bill.
For decades politicians have handed out benefits today while passing the costs on to future generations. And they will continue to do so until younger workers, today’s Millennials, put a stop to it—or what Justice Scalia might call a “revolt.”
Merrill Matthews is a Resident Scholar at the Institute for Policy Innovation. Read more at www.ipi.org.