On behalf of our approximately 1.2 million supporters nationwide, The Senior Citizens League (TSCL) would like to thank Social Security Subcommittee Chairman John Larson and Ranking Member Tom Reed for convening this important hearing and for allowing us the opportunity to submit a statement for the record.
TSCL is a nonpartisan organization that consists of active and informed supporters, most of whom are currently enrolled in Social Security’s Old-Age and Survivors Insurance (OASI) program. TSCL has served as an independent voice for older Americans on Capitol Hill since 1995. We have conducted countless surveys of our supporters over the past twenty years, many on Social Security benefit enhancements and comprehensive reform options.
The results of our surveys show that older Americans – regardless of political affiliation – have strong opinions about the future of the Social Security program. They want Congress to enhance benefits, improve the adequacy of cost-of-living adjustments (COLAs), cut taxes for seniors, and require working Americans – especially the highest earners – to contribute more fairly to the program. They have also made it clear to us that they will not tolerate Social Security benefit cuts for current or future retirees.
In the pages that follow, you will find three benefit enhancements and three revenue increases for which older Americans have expressed overwhelming support. You will also find two recently proposed benefit cuts for which older Americans have shown strong opposition.
Improving the Social Security COLA
The automatic annual Social Security COLA was enacted in 1972 in order to maintain the purchasing power of Social Security benefits. However, the inflation index that is currently utilized – the Consumer Price Index for Urban Wage Earners (CPI-W) – tends to underestimate the inflation older Americans experience because it fails to capture the portion of income that beneficiaries spend on expenses like health care or housing costs.
As a result, Social Security benefits have lost more than a third of their purchasing power since 2000 according to our research. A more adequate measure of the inflation older Americans experience is the Consumer Price Index for the Elderly (CPI-E), which the Bureau of Labor Statistics (BLS) has been tracking since 1987. On average, Social Security benefits would be 0.2 percent higher using this measure of inflation.
Over a twenty-five-year retirement, a benefit increase of that amount would compound significantly. The Senior Citizens League estimates that an individual who filed for Social Security with average benefits over thirty years ago would have received nearly $14,000 more in retirement if the CPI-E had been used to measure inflation.
In a survey that was conducted by The Senior Citizens League between January and March of 2018, 81 percent of respondents expressed their support for the adoption of the CPI-E. Two comprehensive Social Security reform bills – the Social Security 2100 Act (H.R. 860) and the Social Security Expansion Act (H.R. 1170) – would adopt the CPI-E to improve the adequacy of annual COLAs.
The Senior Citizens League has endorsed both of these proposals and we encourage the Social Security Subcommittee to advance them before the end of this year.
Boosting Social Security Benefits
Older Americans also believe a modest boost in Social Security benefits is essential in order to make up for years of inadequate COLAs. In a survey that we conducted between January and March of 2018, 77 percent of our supporters expressed their support for an across-the-board Social Security benefit increase. Only 5 percent of respondents said they would not support a benefit increase.
Both the Social Security 2100 Act and the Social Security Expansion Act would boost benefits modestly for older Americans. The Social Security Expansion Act would increase average benefits by around $65 per month or $800 per year, while the Social Security 2100 Act would increase average benefits by around $30 per month or $350 per year.
Both comprehensive Social Security reform proposals would boost benefits by increasing the first factor in the Primary Insurance Amount formula. The Social Security Expansion Act would gradually increase the first factor by 15 percentage points over the course of fifteen years, while the Social Security 2100 Act would immediately increase the first factor by 3 percentage points.
According to our surveys, beneficiaries enthusiastically support both methods of boosting benefits and they urge Congress to prioritize this issue in the months ahead.
Cutting Taxes for Beneficiaries
Older Americans also hope Congress will act in the 116th Congress to cut taxes for Social Security beneficiaries. This year, millions of beneficiaries with modest incomes just two times higher than the federal poverty level paid taxes on their Social Security benefits.
Since 1984, single filers with incomes over $25,000 and joint filers with incomes over $32,000 have been paying taxes on a portion of their Social Security income. In 1984, only 8 percent of retirees – those with the highest incomes – were affected by this tax. However, this year, around half of all retired households – 51 percent – paid taxes on a portion of their Social Security income according to our latest survey of The Senior Citizens League’s supporters.
Unlike tax brackets that are adjusted annually for inflation, the income thresholds that subject Social Security benefits to taxation have never been adjusted for inflation. Had the income thresholds increased with inflation, the $25,000 threshold for single filers would be up to $61,933 today, and the $32,000 threshold for joint filers would be up to $78,895, based on the Bureau of Labor Statistics’ inflation calculator.
In a survey that we conducted between January and March of 2018, 55 percent of respondents expressed their support for raising the income thresholds that subject Social Security benefits to taxation. Only 12 percent of respondents said they would oppose such a change.
The Social Security 2100 Act would cut taxes for millions of beneficiaries by increasing the income thresholds from $25,000 to $50,000 for individual filers, and from $32,000 to $100,000 for joint filers. The bill is carefully structured so that there would be no loss of revenues going to the Social Security or Medicare programs due to this provision of the legislation.
The Senior Citizens League’s supporters were disappointed that the Tax Cuts and Jobs Act failed to adjust the income thresholds in 2017, and they encourage lawmakers to act immediately by adopting the Social Security 2100 Act.
Paying for Benefit Enhancements
Returning the Social Security program’s Trust Funds to 75-year solvency is an essential part of any comprehensive plan to strengthen and reform the program. Older Americans would like to see Social Security’s manageable shortfall addressed primarily by increasing payroll tax revenues.
Under current law, the payroll tax cap sits at $132,900, and unlike Medicare taxes, the Social Security payroll tax is not applied to any annual income over that amount. In a survey conducted by The Senior Citizens League between January and March of 2018, 59 percent of respondents told us the payroll tax should be applied to all income above $250,000. Seventy-four percent of respondents told us they would prefer to see the payroll tax cap eliminated altogether so that high earners pay taxes on all annual income.
In that same survey, 59 percent of respondents said the payroll tax rate should be gradually increased by 1 percent for both workers and employers. Only 16 percent of respondents opposed this change. Under current law, workers and employers both pay 6.2 percent in payroll taxes, for a combined rate of 12.4 percent.
The Senior Citizens League urges Congress to adopt the Social Security 2100 Act, which would increase both the payroll tax cap and the payroll tax rate. Under this legislation, the payroll tax would be applied to income over $400,000, while the payroll tax rate would gradually increase by 0.1 percentage point per year until it reaches a combined rate of 14.8 percent in 2043.
In addition to these two payroll tax modifications, The Senior Citizens League encourages lawmakers to consider a new tax proposed in the comprehensive Social Security Expansion Act. That bill would apply the 6.2 percent payroll tax rate to investment income – including interest, dividends, and capital gains – over $250,000.
Older Americans believe these three modifications to the payroll tax are fair and responsible. Together, they would cover the cost of benefit enhancements while strengthening the solvency of the trust funds for decades to come.
Cutting Benefits for Current or Future Retirees
Older Americans have made it clear to The Senior Citizens League that they do not support comprehensive Social Security reform proposals that would cut benefits for current or future retirees. They understand the compounding effect that even the smallest benefit cut can have over the course of several years, and they know older Americans living on fixed incomes cannot afford reduced benefits.
In recent years, several proposals that would cut benefits have been proposed on Capitol Hill. Our surveys show seniors oppose two particular policy options: cutting COLAs and increasing the full-benefit retirement age.
Lawmakers on both sides of the aisle have proposed basing Social Security COLAs on a more slowly-growing measure of inflation called the “chained” CPI. President Barack Obama included this measure in his fiscal 2014 budget proposal. In 2016, it was included in comprehensive Social Security reform legislation called the Social Security Reform Act (H.R. 6489 in the 115th Congress). And in 2018, it appeared in the fiscal 2019 budget proposal titled A Framework for Unified Conservatism released by the House Republican Study Committee.
The “chained” COLA would amount to a 0.3 percent reduction in Social Security benefits, but a cut of that size would compound over the course of a retirement. TSCL estimates that a married couple receiving $2,500 per month in Social Security benefits would see their modest benefits cut by $88 per month after ten years under the “chained” CPI. Over a decade, that would amount to a loss in benefits of $5,475.
In a survey conducted by TSCL between January and March of 2018, 48 percent of respondents expressed their opposition to this benefit cut, and only 14 percent of respondents said they would support the adoption of the “chained” CPI.
Older Americans also oppose an increase in the full-benefit retirement age, which is currently increasing gradually from sixty-five to sixty-seven. The comprehensive Social Security Reform Act called for increasing the normal retirement age to sixty-nine, and the House Republican Study Committee’s fiscal 2019 budget proposal called for an increase up to seventy.
In our 2018 survey, only 23 percent of respondents said they would support an increase in the full-benefit eligibility age, while 48 percent expressed their opposition. Older Americans understand that an increase in the retirement age equates to a permanent cut in lifetime benefits – one which they are unwilling to accept.
Various surveys of The Senior Citizens League’s 1.2 million supporters nationwide show that older Americans have strong opinions about the current and future state of the Social Security program. They oppose benefit cuts like the “chained” CPI and an increase in the retirement age, and they urge Congress to enact comprehensive legislation that would enhance Social Security benefits while strengthening the solvency of the Trust Funds for decades to come.
The Senior Citizens League has endorsed the Social Security 2100 Act (H.R. 860) and the Social Security Expansion Act (H.R. 1170), both of which would reform the Social Security program responsibly, without cutting benefits for seniors.
The Senior Citizens League applauds the Social Security Subcommittee for its work on this important issue, and we again thank Chairman Larson and Ranking Member Reed for allowing us the opportunity to submit this statement for the record. In the coming months, we look forward to working with Congress, the Administration, and other stakeholders in any way necessary to protect and enhance the Social Security program.