We Might Be the Last Group of People to Receive Positive Lifetime Tax Benefits

Our children might pay more in taxes than they’ll receive in benefits.

Photo credit: mcpdigital, CC BY 2.0.

I will admit that I clicked on this Bloomberg article because of the headline:

The Old Are Eating the Young

But this isn’t a story about Boomers vs. Millennials. Instead, it’s about people even younger. The kids who will be growing up when the Millennials (theoretically) retire.

In 1970, in the U.S., there were 5.3 workers for every retired person. By 2010 this had fallen to 4.5, and it’s expected to decline to 2.6 by 2050.

I’ll turn 69 in 2050, although it’s yet to be seen whether I’ll be anywhere close to “retired.” Which is probably a good thing, because Satyajit Das—whom Bloomberg named one of the 50 Most Influential Financial Figures in 2014—worries that there won’t be enough earners to fund governments’ financial needs.

Even as spending commitments grow, in other words, there will be fewer and fewer productive adults around to fund them.

And I did put the apostrophe in the right place, because Das is referring to multiple governments around the world. Governments that could default, because they’ve been racking up debts that our children might not be able to pay off.

But even if that doesn’t happen, there’s still the lifetime net tax benefit to worry about.

A final revealing measure is the concept of lifetime net tax benefit, which measures the benefits received over a person’s life by calculating the difference between all taxes paid and all the government transfers that he or she has received and will receive. A 2010 study from the International Monetary Fund found that in the U.S. the lifetime tax burden was positive (tax paid was less than benefits received) for all age cohorts above 18 years, with the largest benefit accruing to those over age 50. But the figure for future generations is negative (benefits received will be less than taxes paid), meaning they’ll have to meet the obligations of their elders.


Also, I wasn’t familiar with the lifetime net tax benefit before, and I’m curious if I really will receive more in government benefits than I’m paying in taxes. Are they only counting “my half” of the freelancer taxes? Are they only counting retirement benefits, or are they factoring in the food stamps I received back in the mid-2000s?

I need to learn more about this benefit before it disappears.

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