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Distributional Implications of Social Security Reform for the Elderly: The Impact of Revising COLAs, the Normal Retirement Age, and the Taxation of Benefits

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  • Johnson, Richard W.

Abstract

Several reform plans have been proposed to reduce the financial strain on Social Security. Many proposals under consideration, however, would exacerbate the inequality of income among the elderly. Using data from the Current Population Survey, this paper finds that reducing cost-of-living escalators, even when the reforms are designed to protect low-income beneficiaries, would generally worsen inequality over time and increase the number of elders with income below the poverty level. Raising the retirement age would generate similar results. However, increasing taxes on retirement benefits would improve the financial outlook for Social Security without imposing additional hardships on the poorest elderly.

Suggested Citation

  • Johnson, Richard W., 1999. "Distributional Implications of Social Security Reform for the Elderly: The Impact of Revising COLAs, the Normal Retirement Age, and the Taxation of Benefits," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(3), pages 505-530, September.
    • Handle: RePEc:ntj:journl:v:52:y:1999:i:3:p:505-30
    DOI: 10.1086/NTJ41789738
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    Cited by:

    1. Coronado Julia Lynn & Fullerton Don & Glass Thomas, 2011. "The Progressivity of Social Security," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-45, November.
    2. Wade Pfau, 2004. "The Impact of a Social Security Cost-of-Living Adjustment Reduction on the Income Distribution of the Elderly in the United States," Econometric Society 2004 Far Eastern Meetings 694, Econometric Society.

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