Social Security Reform is Possible. Let’s Look at What Needs to Happen.
Throughout the election cycle, there was a lot of talk about Social Security reform. According to an article by Vox, the problem is that Social Security is a so-called “pay as you go” system — taxes paid by today’s workers pay retired workers’ benefits. Because the workforce hasn’t grown as fast as the number of baby boomers entering retirement, more is being taken out of Social Security than being put in, so the trust fund is shrinking. If nothing is done, in about 10 years there won’t be enough money left to pay full benefits.
Raising Taxes
Politicians can no longer continue to kick the can down the road. They need to address Social Security now before it’s too late. The article says the solution is to raise taxes. That could put an additional burden on low-wage workers.
At issue is the way the system works. Right now, any income that someone makes above $168,600 is not taxed for Social Security; in 2025 the wage cap will rise to $176,100. That means that higher earners pay a smaller share of their income toward funding Social Security than lower- and middle-income earners.
Scrap the Cap
The Seniors Trust believes it’s time we “scrap the cap” and require the wealthiest Americans to pay their fair share. The Social Security Expansion Act would lift the income tax cap and subject all income above $250,000 to additional Social Security payroll tax. Under this bill, more than 93 percent of households would not see their taxes go up by one penny. And it would extend the solvency of the Social Security trust fund through 2096.
Additionally, this landmark bill would provide seniors with an extra $2,400 in benefits each year and recalculate the way the Social Security cost-of-living-adjustment (COLA) is calculated to be fairer. It calls for using the Consumer Price Index for the Elderly (CPI-E) instead of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) as it more accurately reflects the actual spending of seniors, which tends to be on expenses such as healthcare and housing.
