Rick Delaney, Chairman of the Board
Social Security Legislation Would Provide 75 Years of Solvency For Social Security
If lawmakers wait too long, solutions for fixing Social Security’s financing could involve deep cuts and large abrupt tax increases. But Members of the House Ways and Means Committee are discussing an alternate path to solvency for the program that would boost benefits across the board for all retirees while closing the program’s long-term funding gap.
The bill will provide 75 years of “sustainable solvency” according to Stephen Goss, the Chief Actuary of the Social Security Administration. With enough support, we believe the measure could pass in the House. The bill, as you might correctly suspect, is stirring controversy, particularly among the nation’s most highly paid wage earners.
The Social Security 2100 Act (H.R. 860) introduced by Representative John Larson (CT-1) would:
- Provide a modest boost in benefits for all retirees by recomputing the initial benefit amount using a slightly more generous benefit formula. This would particularly help low earners and women who may have taken time out of the work force to raise a family or care for older family members.
- Provide more generous COLAs by basing the annual computation on the Consumer Price Index for the Elderly (CPI-E). Advisor editor Mary Johnson estimates that boosting the COLAs alone would gradually increase an average benefit of $1,460 by an extra $38 per month after the first ten years, and by an extra $95 per month after 20 years of retirement.
- Lower taxes for millions of older taxpayers, by increasing the income thresholds that subject Social Security to taxation from $25,000 to $50,000 for single filers and from $32,000 to $100,000 for joint returns.
The most controversial aspect of the bill is an increase in payroll tax revenues. The bill would begin imposing Social Security payroll taxes on wages above $400,000 and very gradually raise the payroll tax rate. Under current law workers earning more than $132,900 pay nothing on wages over that amount, no matter whether they earn $133,000 or, as in the case of Apple CEO Tim Cook, more than $12 million. The legislation would fix the $400,000 level, and the current taxable maximum of $132,900 would continue to adjust upward annually. Eventually the two levels would meet in about 28 years. At that point, all wages would be subject to Social Security taxes.
The bill would also increase the overall payroll tax rate by 2.4% from 12.4% to 14.8% by 2043. Currently employees pay 6.2%, and the employer matches the other 6.2%. The bill would start increasing the payroll tax by 0.1 percentage point each year starting in 2020 through 2043. TSCL’s Senior Survey found that 74% of survey participants support lifting the amount of wages subject to payroll taxes to apply to all earnings. In addition, 60% of survey participants support increasing the payroll tax rate by 1%.
The legislation is moving in the House, and already has 210 cosponsors putting it close to a majority. You can help move this legislation along by contacting your Members of Congress and getting the word out to others. Contact info can be found at www.SeniorsLeague.org.