6 Proposed Changes to Social Security and What They Could Mean for the Program’s Future
Social Security actuaries project a deficit for the combined trust funds over the next 75 years of 3.54% of taxable payrolls, per an August report, 0.32 percentage points greater than last year. This data reflects rising costs, yet constant levels of income, as the number of retirees begins to outpace those participating in the American workforce.
Rep. Al Lawson of Florida recently proposed Social Security legislation, making it the second major Social Security bill in a month. Named the “Social Security for Future Generations Act of 2021,” here is what the Lawson legislation proposes:
- Applying the combined OASDI payroll tax rate on wages and self-employment income above $250,000 paid in 2022 and later.
- An inclusion of earnings over $250,000 in the Social Security benefit formula. A 2% benefit factor on average earnings would be applied above the current law maximum.
- Using the Consumer Price Index for the Elderly (CPI-E), which has risen faster than the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), to calculate the relevant cost-of-living adjustment (COLA).
- Extended benefit eligibility for children up to the age of 23 who are full-time students.
- An increase in the minimum benefit for lifetime low earners based on years in the workforce.
- Establish an alternative benefit amount for surviving spouses equal to 75% of the couple’s benefit and subject to an upper limit.
The enactment of these provisions would maintain current benefits and raise additional revenues, per a report prepared by Chief Actuary Stephen Goss. Social Security’s long-range deficit would also be reduced from 3.54% of taxable payroll to 1.88%, according to Alicia H. Munnell, director of the Center for Retirement Research at Boston College.
“In the end, however, any solution is likely to involve a modest increase in the payroll tax rate, a change that would raise taxes on those with less than $400,000,” Munnell writes.
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