Social Security benefits will increase by a tepid 1.5% in January. That will boost the average monthly Social Security benefit of $1,161 by only $17.40 per month. But despite slow growth in benefits, TSCL remains highly concerned that COLA cuts could become part of budget deals.
With tense budget negotiations once underway, "chaining" the Social Security COLA remains a key element of the most widely debated debt reduction plans.
But while there's been a great deal of discussion of the budget benefits of slowing COLA growth, there's been virtually no discussion in Congress of another option that would reduce Social Security’s financing deficit by as much as 90 percent – raising the maximum taxable wage limit.
Under current law, middle-to-low earning workers pay Social Security taxes of 6.2% on every dime of their income. But anyone earning more than $113,700 per year pays no Social Security on the excess over that amount. For example: Workers earning $25,000 a year pay Social Security on 100% of their earnings. Those Americans earning $113,699 annually also pay Social Security on 100% of earnings. But someone who earns $1,000,000 will pay Social Security on just $113,700, which is only 11 percent of his or her earnings. The millionaire pays no Social Security taxes on the remaining $886,300!
TSCL believes that the time has come to end this "millionaire's tax loophole." It discriminates against the majority of American workers. It needlessly reduces the amount of revenues when the program has begun to pay out more in benefits than it receives in payroll taxes. And, it is putting COLAs of 54 million seniors at risk of further cuts. The annual increase is failing to keep up with senior costs even now.
TSCL supports legislation that would increase the taxable maximum, making the system more fair and improving solvency. TSCL supports H.R. 1029, the "No Loopholes in Social Security Taxes" legislation introduced by Representative Peter DeFazio (OR-4), and the companion bill introduced by Senator "Bernie" Sanders (VT), S. 500, "Keeping Our Social Security Promises," which are steps in the right direction. To learn more about the COLA, see the Legislative Update "With COLAs Target Of Budget Cuts, Seniors Question High Earner Tax Break"