What happened to Social Security 2100?
At least there is some effort, but the Biden proposal for Social Security changes does not make the program solvent, modestly raises some benefits while further changing the basic concept of shared worker funding by requiring high earners to pay higher taxes for zero additional earned benefits. It asks less than 2% of wage earners to shoulder the entire burden of helping the program to survive.
And it does not place Social Security on an automatic sustainable course.
Summary: PWBM projects that Democratic presidential candidate Joe Biden’s Social Security reform plan would reduce the program’s conventional 75-year imbalance by 1.5 percent of current law taxable payroll, leaving a remaining imbalance equal to 2.0 percent of current law taxable payroll. We project that it would lower GDP by 0.6 percent in 2030 and 0.8 percent in 2050.
Source: Analysis of the Biden Plan for Social Security — Penn Wharton Budget Model
According to the Committee for a Responsible Federal Budget, “This (Biden) proposal would raise $800 billion to $1.04 trillion over a decade. It would also raise 1.92 percent of payroll over 75 years, which would close 60 percent of Social Security’s solvency gap.”
Future COLAs would use the CPI-E in place of the CPI-W, but that creates unrealistic expectations. The difference between the two measures are historically very small, typically less than one percent and occasionally the CPI-E is lower. It is projected to increase the shortfall by 15% over 75-years.
Why shouldn’t every worker participate in making the program sustainable? Why shouldn’t every worker receive some benefit based on their contributions?
Why should a single high income earner pay more in taxes and get nothing more in benefits while a two income family with the same income pay far less and receives more in benefits?
There are many changes (closing loopholes in political speak) possible that would fairly spread the cost. For example, why are health insurance premiums paid on a pre-tax basis under Section 125 of the IRC not taxed for FICA? Just doing that would cover 7% of the funding gap.
Or, include newly hired state and local workers in Social Security. That closes another 10% of funding shortfall using the Committee for a Responsible Federal Budget calculator.
He’s buying votes – selling the crap that his solution raises benefits for many, while applying the expense only to individuals who earn in excess of $400,000. Confirms he has studied at the Bernie/Liz school of economics.
I guess $400,000 is how Biden defines taxes to be paid by “millionaires and billionaires”. Funny definition – as it doesn’t focus on wealth and the income is only 40% of a million. I am surprised that he limited the surcharge to “big corporations” to the 50% of OASDI (FICA) taxes paid by employers – they are such an easy target.
Why is more taxes the solution to almost every problem…seems to be a failed ideology?
Could you define exactly who would qualify as a “high earner”? Especially interested for married filing jointly threshold? Thanks for all your insightful posts.
As far as SS is concerned there is no household threshold. It’s all on the individual. Biden plan talks about $400,000 for extra taxes. Thus a household earning $400,000 escapes new taxes, but an individual earner does not. Other proposals place the higher taxes at $200,000. In reality anyone earning above $70,000 or so is a high earner, given the median household income is about $70,000.
If I am not mistaken, this year you stop paying the social security tax when you earn above $137,700. So if you make more than that you might be at the whims of a future politicians declaring you a high wage earner. (This number adjusted every year.) Currently, your benefits do not increase when you earn more than $137,700 and that is why you stop paying the tax because your benefits are capped.