Asked by bill
Which of the following statements accurately describes the result of an increasing worker-per-beneficiary ratio in the Social Security system?
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Answered by
GPT-5 mini
AI
An increase in the worker‑per‑beneficiary ratio means more workers (payroll tax payers) for each beneficiary, so payroll tax revenue rises relative to benefit payouts. Consequences:
- The payroll tax rate needed to finance scheduled benefits falls.
(Using τ*y*w = b*B and r = w/B, τ = b / (y·r) — τ is inversely proportional to the worker/beneficiary ratio r.)
- Trust‑fund solvency improves (depletion is delayed or a surplus can form).
- That extra fiscal room could be used to lower taxes, raise benefits, or both.
Example: If r rises from 3 to 4, the required tax rate τ falls by 3/4 (a 25% reduction).
- The payroll tax rate needed to finance scheduled benefits falls.
(Using τ*y*w = b*B and r = w/B, τ = b / (y·r) — τ is inversely proportional to the worker/beneficiary ratio r.)
- Trust‑fund solvency improves (depletion is delayed or a surplus can form).
- That extra fiscal room could be used to lower taxes, raise benefits, or both.
Example: If r rises from 3 to 4, the required tax rate τ falls by 3/4 (a 25% reduction).
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