Rick Delaney, TSCL Chairman of the Board
When it comes to fixing Social Security, Congress has no success stories. The job of bringing Social Security into balance, involves cutting benefits or raising taxes, and in the past — a combination of both. The last time that major Social Security reform legislation became law was almost 4 decades ago in 1983. The fact is, fixing Social Security’s financing issues presents potential conflicts of interest for the very lawmakers who must introduce and vote on the legislation to fix the program. It’s a vote that would hit every single Member of the House and Senate square in the pocket.
To bring Social Security back into balance, Members of Congress would have to raise payroll taxes or, cut benefits, or some combination of the two. The people affected by the changes not only includes constituents, but every Member of Congress themselves. Despite what you otherwise may have heard, since 1983, Members of Congress have paid into, and eventually can receive Social Security benefits when they meet other eligibility requirements.
One of the most common misconceptions is that Members of Congress don’t pay into Social Security. That’s not entirely true. The federal government withholds Social Security payroll taxes up to the annual taxable maximum ($147,000 in 2022) for every lawmaker. But because Members of Congress earn $174,000 per year (or more for House and Senate leadership), your Representative and Senators are only subject to payroll taxes on the first $147,000 of their earnings. As is true of all workers, no Social Security taxes are withheld for the amount over $147,000 -- $27,000. As many of you have pointed out in the past, the salaries of all Members of Congress and the residents of the White House are paid for by U.S. taxpayers.
Time is growing short for Social Security’s solvency. The most recent Social Security Trustee report indicates that the program is expected to become insolvent around 2035, leaving little more than a dozen years or so to enact and phase in the changes required to reduce deficits. The Social Security Trustees have estimated that if Congress does nothing to resolve the financing issues, when insolvency occurs, Social Security benefits of all beneficiaries would be reduced by about 22% to match payroll tax revenues still received by the program.
So far Congress has never allowed Social Security to become insolvent but, waiting until the last minute can have steep costs for workers and Social Security recipients. The last time Social Security ran low, in the late 70’s and early 80’s the program was only weeks away from insolvency. Congress enacted major legislation that included not just a benefit cut, but multiple types of benefit cuts and tax increases that affect retirees and workers today. Some of the benefit cuts which went into effect quickly, were controversial and highly contentious for decades. Every worker and retiree was affected differently, but TSCL’s review of archival materials from this period revealed that millions of people close to retirement wound up with benefit reductions of up to 25%.
It comes as no surprise that 65% of participants in TSCL’s Seniors Priority Plan Survey want Congress to focus on Social Security changes that raise tax revenues without benefit cuts. Only 5% thought Congress should focus on plans that combine benefit cuts and tax increases and another 4% thought benefits should be cut to avoid raising taxes.
Of proposals to strengthen Social Security’s revenues, the one with the most support among survey participants (48%) would eliminate taxable maximum on wages (currently $147,000) and apply the Social Security payroll tax to 100% of earnings. Another 17% of survey participants thought that Congress should very gradually increase the rate of Social Security taxes paid by workers and matched by employers from 12.4% to 13.4%. Fifteen percent of survey participants didn’t support either option, and 20% were uncertain about these proposals.
To maintain the strength of Social Security’s financing, Congress needs to act sooner rather than wait until it’s too late. It’s in everyone’s interest to find out what your Members of Congress say about cutting Social Security benefits and raising taxes. That’s a tall order. But taking no action at all to address Social Security’s finances is not an option either. Doing nothing, and waiting could mean a 22% benefit cut for everyone current and future retirees, may be coming by the end of the next decade. To prevent that, it’s important for every one of us to get involved to defend earned benefits. It’s an election year. It’s a good time to make sure your voter registration is up-to-date and to get up to speed on where your candidates stand on Social Security.