Payroll Taxes A Sticking Point in Social Security “Boost Bill”
By Shannon Benton, Executive Director
Legislation that would boost Social Security benefits and restore Social Security’s solvency has been under debate this fall in the U.S. House. The Social Security 2100 Act (H.R. 860), introduced by Representative John Larson (CT-1) in the House, and (S. 269) introduced by Senator Richard Blumenthal, have strong grass roots support from older Americans. While the House bill is advancing— we are steeling for a tough challenge in the Senate.
Action from Congress is needed to address Social Security’s looming shortfall. Without it, the Social Security Trust Fund is estimated to run short by 2035. Should that occur, benefits would be reduced by about 22% to match the level of payroll taxes coming in.
Representative Larson’s bill addresses the growing problems of benefit adequacy and program finances by:
- Boosting Social Security benefits for everyone. The proposed boost would equal 2% of average benefits (about $30 per month).
- Tying the annual cost-of-living adjustments (COLAs) to the Consumer Price Index for the Elderly (CPI-E). We expect this change would pay a COLA that’s about .25 percentage point per year higher and would boost average benefits about $80 per month by the end of a 20-year period.
- Reducing the taxation of Social Security benefits by increasing the income thresholds that subject Social Security benefits, from $25,000 for single filers and $32,000 for joint returns, to $50,000 and $100,000 respectively.
- Addressing the Social Security Trust Fund shortfall by increasing both the amount of wages subject to taxation and, increasing the payroll tax rate. The bill would immediately tax wages above $400,000. That threshold would not be adjusted annually, and the current law maximum of $132,900 would continue to increase as scheduled, slowly closing the gap, until all covered earnings would be subject to payroll taxes by 2048. The bill would raise the payroll tax rate 0.1 percentage point per year until it reached 14.8% —2.4% higher than today. Currently employees and employers each pay 6.2% for a total of 12.4%.
While 211 Members have signed onto the House bill, critics of the legislation worry about increasing the payroll tax rate — especially on lower income workers. Lawmakers are continuing to discuss alternatives, and TSCL continues to meet with Members of Congress. TSCL’s Senior Survey has found 74% of survey participants support completely lifting the taxable maximum and applying the payroll tax to all earnings. About 61% of survey participants support increasing the payroll tax rate by 1% each for workers and employers.
In the months ahead, The Senior Citizens League will continue to advocate for these and other policy solutions that would boost and strengthen Social Security benefits for current and future beneficiaries. For progress updates, follow The Senior Citizens League on Twitter.