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UNCHECKED ENTITLEMENT SPENDING COULD WALLOP FUTURE TAXPAYERS

SHARE UNCHECKED ENTITLEMENT SPENDING COULD WALLOP FUTURE TAXPAYERS

Babies born today may earn drastically less than their parents in after-tax income without major restraint of Social Security, Medicare and other entitlement programs, a taxpayer advocacy group said Friday.

The National Taxpayers Union Foundation predicted that paying for unharnessed entitlement programs will drive up the total tax rate on workers from 41 percent today to as much as 69 percent by the year 2040.The report said the annual cost of Social Security and Medicare as a percent of workers' taxable pay will go from 16.5 percent in 1993 to between 34 percent and 55 percent by 2040.

"The graying of the welfare state is likely to have catastrophic consequences for the after-tax living standards of most working-age Americans," said the study's author, NTUF economist Neil Howe.

The report said politicians cannot continue to advocate balanced budgets and tax cuts "without also talking about major, structural reforms in `untouchable' senior entitlements. Everything must be on the table."

The study assumed a balanced budget will gradually be adopted and that other government spending will rise over the next 45 years at the same rate as the domestic economy. It used Social Security Administration and Health Care Financing Administration spending projections.

The group said that even if the next half-century sees uninterrupted prosperity, after-tax earnings per worker in 1993 dollars would stagnate, moving from $19,221 in 1995 to $19,346 in 2040.

Under a less optimistic scenario, real take-home pay would fall to $7,821 in 2040, a 59 percent reduction.

Total federal, state and local government spending would rise from 34 percent of gross domestic product in 1995 to 44 percent under the best-case scenario.