Senator Sanders, Warren and others propose expanding Social Security benefits and extending the trust solvency by a combination of higher taxes on a small percentage of Americans [about 5%] while providing no comparable increase in their benefits. In other words change the very foundations of SS as a self funded, pay as you go program with a link between earnings and benefits. In addition, funding would be dependent on highly variable future investment income.
Sections 6 and 7. Apply the combined OASDI payroll tax rate on earnings above $250,000, effective for 2024 and later. Tax all earnings once the current-law taxable maximum exceeds $250,000. Do not credit the additional taxed earnings for benefit purposes.
Section 8a. Apply a separate 12.4-percent tax on investment income as defined in the Affordable Care Act (ACA), payable to the OASI and DI Trust Funds with unindexed thresholds as in the ACA, effective for 2024 and later. The ACA thresholds are $200,000 for a single filer and $250,000 for a married couple filing jointly. Under this provision, there is no limit on the amount taxed.
Section 8b. Apply a 16.2-percent net investment income (NII) tax on active S-corporation holders and active limited partners, effective for 2024 and later. Of the total 16.2 percent tax, 12.4 percentage points would be payable to the OASI and DI Trust Funds, and 3.8 percentage points would be payable to the General Fund of the Treasury.
Section 9. Combine the current separate Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds into a single Social Security Trust Fund, effective January 1, 2024.https://www.sanders.senate.gov/wp-content/uploads/SandersLetter-2023-0213.pdf
I agree that something needs to be done in order to improve the solvency of Social Security, and that the burden should not fall on the majority of Americans. However, I am not sure if I agree with the proposed solution of Senator Sanders, Warren and others, which would require less than 5% of Americans to make Social Security solvent and pay for increased benefits. The proposed solution of taxing earnings above $250,000 and introducing a 12.4-percent tax on investment income does seem like a good idea, but I am a bit concerned about how the taxation of the additional taxed earnings will affect the current-law taxable maximum and the benefit calculations. Should less than 5% of Americans make Social Security solvent and pay for increased benefits?
I would worry about the unintended consequences of adding 12.4% tax on investment income. Capital gains tax rates are 15% and 20% now. Adding the additional 12.4% tax to the capital gains tax and some one could be paying up to 32.4% on their investments. How will that affect retirees in addition to their basic income tax rates? If you sell a vacation property will you get hit with a 32% tax? What if you profit on your primary home? Taxes for the wealthy have always tickled down to the middle class.
Why should the burden not fall on the majority of Americans as they are the ones who benefit the most and have been funding the program for the last 88 years?
It’s good to know that frick and frack are still out there spouting their nonsense as usual. They certainly have a laser like focus on wealth taxes. I suppose they believe they are thinking outside the box.
What is your solution? VAT?
No, a VAT may be desirable overall because we should deal with the deficit or cut spending, but not for SS. Any number of minor revenue changes gradually implemented over time will do the job. Many were outlined in the Social Security 2100 bill that was ignored. If Congress had made minor changes over the last 20 years and took action as urged by the trustees, we would not be having this discussion today.
I don’t trust ANYTHING that Sanders and Warren say.