There are a number of proposals out there to shore up Social Security, and they usually involve raising taxes, cutting benefits, or some combination of the two. Generally, those on the left tend to prefer tax increases on the wealthy, while those on the right tend to prefer benefit cuts for younger generations.
Let’s take a closer look at one of those proposals: Congressman John Larson’s “Social Security 2100 Act.” The Democratic chairman of the Ways and Means Subcommittee on Social Security, Congressman Larson introduced the bill in the House of Representatives in January 2019. Among other things, the bill would:
- Make initial benefits for lower-income earners slightly more generous,
- Increase future “cost of living adjustments” for Social Security recipients by using a price index (CPI-E) that grows faster than the current (CPI-W) price index.
- Tax earnings above $400,000 but only credit a portion of those taxes for future benefits,
- Increase the payroll tax rate by 0.1 percentage point a year until it reaches 14.8 percent (it’s currently 12.4 percent).
The Social Security Administration estimates that Congressman Larson’s bill would return the trust fund to solvency and reverse its downward trend by around 2040. Instead of going bankrupt in 2035, the trust fund would hold just over 300 percent of the annual cost of Social Security by 2095.
Proponents of Larson’s bill argue that tax increases, especially on the wealthy, help to fix long-run finances while making the program even more progressive. Opponents believe that raising taxes would lower economic growth and unfairly increase the burden on younger generations.
Want to learn more? You can find the write-up from the Office of the Chief Actuary of the SSA here. Super-interested readers can even sign up for email notifications about new SSA publications here!