Ask The Advisor: May 2011

Ask The Advisor: May 2011

Q:  Did Congress get a cost-of-living adjustment this year?  In 2010, my grocery bills went up 16.5%, gasoline up — 30%, property taxes up — 55%, utilities up — 17%.  With no Social Security COLA, it is getting imposible to live and pay bills.  The maximum payment to Congress and their employees should be $700 per month to live on for the rest of their life.

A:  No, Congress did not get a COLA.  In a rare moment of political bipartisanship last year lawmakers wisely agreed that giving themselves a COLA, in an election year when seniors had gotten zero COLA, was a bad idea.  In addition, legislation passed on December 22, 2010 freezes their $174,000 annual pay through December 31, 2012.

Congress has received a raise in seven out of the past ten years.  Normally, Members of Congress get an automatic cost-of-living adjustment (COLA) every year.  Unlike the COLA received by Social Security beneficiaries that’s based on the Consumer Price Index for Workers (CPI-W), the Congressional COLA tends to be higher, and grow more rapidly than Social Security COLAs.  Congressional COLAs are based on an index that measures employment costs, which tend to grow more quickly than consumer prices.  In order not to get a pay boost, Members of Congress must vote to freeze their own pay.

Many people believe that Members of Congress don’t pay into Social Security, but that’s a myth — they do.  However, they don’t pay Social Security taxes on all of their earnings.  The Social Security maximum taxable wage threshold is $106,800 in 2011, so Members of Congress won’t pay Social Security taxes on $67,200 in earnings this year.  Medicare taxes will be deducted for the full amount as required by law.

But even though they turned down a prospective payraise that would have boosted their pay by $1,600 in 2011, Members of Congress won’t go without higher paychecks.  In 2011, Congress enacted tax legislation that gave workers a payroll tax holiday of 2% up to the maximum taxable earnings of $106,800.  That means Members of Congress will enjoy the maximum tax break and pocket $2,136 in higher paychecks instead.

“We frequently receive email from seniors who believe that if Congress received the same COLA as they do, they would think twice before advocating COLA cuts, ” says TSCL Chairman Larry Hyland. “If Congress thinks the Social Security COLA ‘overpays’ Social Security recipients, then Congress should try it on for size,” Hyland suggests.

Sources:  “Salaries of Members of Congress:  Recent Actions and Historical Tables,” Ida A. Brudnick, Congressional Research Service, February 9, 2011.  “2011 Social Security Changes,” Fact Sheet, Social Security Administration, October 15, 2010.  “Payroll Tax Cut to Boost Take-Home Pay For Most Workers,” IRS, December 17, 2010.