This week, The Senior Citizens League (TSCL) submitted a statement to the House Ways and Means Social Security Subcommittee outlining comprehensive legislative proposals that would strengthen and enhance the Social Security program.
TSCL Submits Statement on Social Security Enhancements
On Wednesday, the House Ways and Means Social Security Subcommittee held a hearing to discuss comprehensive legislative proposals that would reform Social Security, and TSCL submitted a statement outlining the enhancements older Americans would like Congress to adopt.
In the statement – which can be read in full right here – The Senior Citizens League recommended three Social Security benefit enhancements and three modifications to the payroll tax that have the overwhelming support of older Americans. The statement also addressed two recently proposed benefit cuts that surveys show seniors strongly oppose. Together, the policy changes recommended by The Senior Citizens League would enhance benefits and strengthen the solvency of the Social Security Trust Funds for decades to come.
The three benefit enhancements recommended by TSCL are:
- Improving the Cost-of-Living Adjustment (COLA). Under current law, COLAs are based on the way young workers spend their money using the Consumer Price Index for Urban Wage Earners (CPI-W). A more adequate measure of the inflation older Americans experience is the Consumer Price Index for the Elderly (CPI-E). We estimate that individuals who filed for Social Security with average benefits over thirty years ago would have received nearly $14,000 more in retirement if COLAs had been based on the CPI-E.
- Boosting Social Security benefits. Since 2000, Medicare Part B premiums have grown by 195 percent. Average annual out-of-pocket spending on prescription drugs has increased by 188 percent. But Social Security benefits have grown by just 46 percent since 2000. A modest boost in benefits is essential in order to make up for years of inadequate COLAs and skyrocketing health care costs. The Senior Citizens League believes a benefit boost of $70 per month is a fair increase.
- Cutting Taxes for 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. The income thresholds for the taxation of benefits – set at $25,000 for individuals and $32,000 for joint filers – were first established in 1984 and have not been adjusted for inflation since then. We urge Congress to act this year by increasing the thresholds for the taxation of Social Security benefits to $50,000 for individuals or $100,000 for joint filers.
The three modifications to the payroll tax recommended by TSCL are:
- Increasing the payroll tax cap. 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. That means many of the highest earners stop contributing to the Social Security program just hours or days into the New Year. TSCL believes requiring high earners to contribute to the program more fairly is a commonsense policy solution.
- Increasing the payroll tax rate. TSCL also believes gradually increasing the payroll tax rate for all workers and employers is necessary in order to strengthen the program’s solvency. Currently, workers and employers both pay 6.2 percent in payroll taxes, for a combined rate of 12.4 percent. A popular proposal on Capitol Hill would gradually increase the rate by 0.1 percentage point per year until it reaches a combined rate of 14.8 percent in 2043.
- Applying the payroll tax to the investment income of high earners. Another proposal would apply the current Social Security payroll tax rate of 6.2 percent to all investment income – including interest, dividends, and capital gains – over $250,000. Under current law, only earned income is subjected to the Social Security payroll tax. This modification would go a long way in improving the finances of the Social Security program.
The two benefit cuts opposed by TSCL are:
- Adopting the “chained” COLA. 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. This change would amount to a 0.3 percent reduction in Social Security benefits, but a cut of that size would compound significantly over the course of a retirement. 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.
- Increasing the full-benefit eligibility age. Several lawmakers have also advocated for increasing the full-benefit retirement age, which is already increasing gradually from sixty-five to sixty-seven. Proposals that have gained support on Capitol Hill would raise the age to sixty-nine or seventy. In a 2018 survey conducted by TSCL, 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.
The Senior Citizens League understands that the Social Security program faces a manageable financing shortfall, and we urge lawmakers to act soon to return the program’s Trust Funds to 75-year solvency. The Senior Citizens League has endorsed two comprehensive Social Security reform proposals now before Congress – the Social Security 2100 Act (H.R. 860) and the Social Security Expansion Act (H.R. 1170). Both bills would reform the program responsibly, without cutting benefits for current or future retirees.
For more information about these and other bills that would strengthen the Social Security program, visit the Bill Tracking section of our website. To read the full statement submitted by TSCL to the House Ways and Means Social Security Subcommittee this week, click here.