We can fix Social Security and still keep the current structure where all wages taxed deliver some future benefit to all.
PIA formula
For an individual who first becomes eligible for old-age insurance benefits or disability insurance benefits in 2023, or who dies in 2023 before becoming eligible for benefits, his/her PIA will be the sum of:
(a) 90 percent of the first $1,115 of his/her average indexed monthly earnings,
plus(b) 32 percent of his/her average indexed monthly earnings over $1,115 and through $6,721,
plus(c) 15 percent of his/her average indexed monthly earnings over $6,721.
The three percentages (90,32 and 12 are fixed by law, the dollar amounts (PIA) (bend points) are calculated annually.
If you wanted to increase benefits, you would increase the percentages. It’s similar to how many pension plans work.
The current 32% bend point tops out at a primary insurance amount of $80,652 per year – inflation adjusted average earnings. Increasing the 90% and 32% would increase benefits for most workers.
To raise more revenue we could add another piece to the formula. For example, add a 5% factor and apply that to all taxable earnings above the 15% bend point. That would allow raising the taxable wage base while retaining the basic funding concept of Social Security. Given a benefit of only 5% on higher earnings is used, additional revenue is also created.
The point is there are near endless ways to both increase benefits for those who most need it, to raise the Trust revenue and to maintain the basic structure without turning the program into pure welfare by higher taxes with no benefit for some Americans.
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