Social Security's Office of Chief Actuary has put out an update to its set of financial estimates for various options to change Social Security programs, mostly options that would reduce Social Security's long term financing problems. Here are some of the more popular options expressed in the percentage of long term financing deficit eliminated (positive number) or increased (negative number):
- Starting December 2019, reduce the annual COLA by 1 percentage point +64%
- Starting December 2019, add 1 percentage point to the annual COLA for beneficiaries who have lived past a "specified age". -3%
- Price indexing of PIA factors beginning with those newly eligible for OASDI benefits in 2025: Reduce factors so that initial benefits grow by inflation rather than by the SSA average wage index +98%
- Provide an increase in the benefit level of any beneficiary who is 85 or older at the beginning of 2020 or who reaches their 85th birthday after the beginning of 2020 -5%
- Give credit to parents with a child under 6 for earnings for up to five years. The earnings credited for a childcare year equal one half of the SSA average wage index (about $25,947 in 2018). The credits are available for all past years to newly eligible retired-worker and disabled-worker beneficiaries starting in 2019. -8%
- After the normal retirement age (NRA) reaches 67 for those age 62 in 2022, increase the NRA 1 month every 2 years until the NRA reaches 68 +13%
- Increase the payroll tax rate (currently 12.4 percent) to 15.4 percent in 2019 and later. 100%
- Eliminate the taxable maximum in years 2019 and later, and apply full 12.4 percent payroll tax rate to all earnings. Do not provide benefit credit for earnings above the current-law taxable maximum. +83%
- Expand covered earnings to include employer and employee premiums for employer-sponsored group health insurance (ESI). Starting in 2022, phase out the OASDI payroll tax exclusion for ESI premiums. Set an exclusion level at the 75th percentile of premium distribution in 2022, with amounts above that subject to the payroll tax. Reduce the exclusion level each year by 10 percent of the 2022 exclusion level until fully eliminated in 2031. Eliminate the excise tax on ESI premiums starting in 2022. +32%
Of the ones listed, I agree most with "Increase the payroll tax rate (currently 12.4 percent) to 15.4 percent in 2019 and later." This would be a 1.5% increase each on employees and employers, which most people would hardly notice. However, it would be much better to phase the increase in over a longer period. Unfortunately, the gradual options listed (on the fuller list) include a several-year delay in starting the increase and then a 0.1% increase per year, which is too slow. Something like a 0.2% per year each for employee and employee starting soon would solve the problem. Since real wages tend to increase at several times this rate, they would still be going up on an after-tax basis.
ReplyDeleteRaising the cap somewhat would also be OK with me, but would be unpopular with the wealthy, who run the world, so I'm fine with the option above. I'd rather see their income taxes increased, if and when that is politically possible, and keep the changes to Social Security to a minimum. I'm also opposed to any cuts in Social Security, whether you disguise it as an increase in the NRA, a decrease in the COLA, price indexing, etc.
As one who would see her taxes increased, I would be totally fine with eliminating the tax maximum.
ReplyDeleteyeah, no 11:49. not in favor of another regressive tax measure that hits at the very first dollar and every dollar a poor person will make with another 1.5 percent of federal tax. just lift the cap on income for FICA and sit back and realize the cycles of aging/work will take care of the rest such that you won't have to ever do much, if any, tweaking ever again.
ReplyDeleteOne question: if you eliminate the cap, then won't the benefits increase at retirement / disability? Someone now making a million a year only gets taxed by SS on 15% of that and the benefits are capped as well.
ReplyDeleteYou know a simple increase of 1.5% back when the largest cohort was working would have solved this without a problem, funny, they never did that to themselves but sure as hell are willing to increase the taxes on somebody else to pay for them!
ReplyDelete@7:08 There is a proposal that calls for no increased benefits (the one listed), an alternative that calls for increased benefits with the current formula, and a proposal that calls for increased benefits with a new bend point, so that the increase in benefits with an increase in taxable income is decreased.
ReplyDelete@9:38 There were regular tax increases from the start of Social Security until 1990. The tax increases in the 1980s made the trust funds go from decreasing each year to rapidly increasing. In addition, the retirement age has been raised so benefits have been cuts. So we "baby boomers" had our taxes increased and benefits cut, and as a result there is a 3 trillion dollar trust fund (it was still increasing at more than $100 billion/year in 2009). If young people today want to see their benefits cut rather than pay a few more dollars a week, that's OK with me. But I think it's a bad idea - most of you will be old one day, and you all won't be wealthy. Social Security keeps a lot of people out of poverty today, and that will be true in the future.
@12:37 will a Boomer ever accept responsibility for anything? Ever? Remember if we quit paying you wont get paid! We dont expect to get paid. Why wouldnt we want to see your benefits cut knowing we will not get a penny from the system?
ReplyDeleteGiven an option to opt out, I would take it instantly.
@447--Baby boomers said the same thing 30 years ago. After all, it was earlier generations that paid as little as 1% SSA taxes.
ReplyDeleteRe opting out. Heard that before. Get a job with a state or other govt entity that doesn't pay into SSA. Or become self employed and under report your earnings like some do. Interesting when they file for SSA and find out they are only going to get $400 a month. "I have worked and paid in my whole life!" Well, paying in on wages of $5K a year doesn't get you much return. Frequently they live on the nice side of the tracks so it's probable that they under reported. Ask them how effectively opting out worked.