The House Social Security Subcommittee has scheduled a legislative hearing on the Social Security 2100 Act for July 25. I don't know what a "legislative hearing" is. Apparently, this isn't a markup session where Subcommittee members approve the final language of a bill. Will the Subcommittee be hearing from members of Congress who aren't on the Subcommittee?
This bill won't be enacted in this Congress. It may never make it out of the full Ways and Means Committee and it will certainly won't get a vote in the Senate. This is about setting a Democratic agenda for the future, especially if Democrats gain the White House and Senate after the 2020 election.
Here's a summary of the Social Security 2100 Act from the Chairman of the Subcommittee, John Larson of Connecticut:
- Benefit bump for current and new beneficiaries – Provides an increase for all beneficiaries that is the equivalent of 2% of the average benefit. The United States faces a retirement crisis and a modest boost in Social Security benefits strengthens the one leg of the retirement system that that is universal and the most reliable. [Sec. 101]
- Protection against inflation – Improves the annual cost of living adjustment (COLA) formula to better reflect the costs incurred by seniors through adopting a CPI-E formula. This provision will help seniors who spend a greater portion of their income on health care and other necessities. Improved inflation protection will especially help older retirees and widows who are more likely to rely on Social Security benefits as they age. [Sec. 102]
- Protect low income workers – No one who paid into the system over a lifetime should retire into poverty. The new minimum benefit will be set at 25% above the poverty line and would be tied to wage levels to ensure that the minimum benefit does not fall behind. [Sec. 103]
- Cut taxes for beneficiaries – Over 12 million Social Security recipients would see a tax cut[ii]. Presently, your Social Security benefits are taxed if you have non-Social Security income exceeding $25,000 for an individual or $32,000 for couples. This would raise that threshold to $50,000 and $100,000 respectively. [Sec. 104]
- Holding SSI, Medicaid, and CHIP Beneficiaries Harmless – Ensures that any increase in benefits from the bill do not result in a reduction in SSI benefits or loss of eligibility for Medicaid or CHIP. [Sec. 105]
- Have millionaires and billionaires pay the same rate as everyone else – Presently, payroll taxes are not collected on wages over $132,900. This legislation would apply the payroll tax to wages above $400,000. This provision would only affect the top 0.4% of wage earners. [Sec. 201, 202]
- 50 cents per week to keep the system solvent – Gradually phase in an increase in the contribution rate beginning in 2020 so that by 2043, workers and employers would pay 7.4% instead of 6.2% today. For the average worker this would mean paying an additional 50 cents per week every year to keep the system solvent. [Sec. 203]
- Social Security Trust Fund Established – Social Security provides all-in-one retirement, survivor, and disability benefits funded through the dedicated FICA contribution paid by workers. There are technically two trust funds, Old-Age and Survivors (OASI) and Disability Insurance (DI), and that are usually referred to as the Social Security Trust Fund. This provision combines the OASI & DI trust funds into one Social Security Trust Fund, to ensure that all benefits will be paid. [Sec. 204]
The "50 cents per week" proposal doesn't make sense. The only way the math works out on that is if the average workers I"ve never been strong at math so if I'm wrong, please feel free to correct me and make me look completely stupid, as I may well be. But, I'm thinking this: That's an increase of 1.2%. 1.2% of $120 would be $1.20 wouldn't it? So, in order for this to only cost the average worker 50 cents per week, the average worker would only be making about $42 per week. In my state, minimum wage is $9.25. Again, I'm not a math whiz so I could be wrong, but, by my figures, this would cost a minimum wage, full-time worker $4.44 per week which is about $230 per year. $230 may not seem like a lot to some but for a minimum wage worker, it is significant. And, for small businesses, when you multiply that number by the number of employees that business may have, it can be a significant increase in payroll expenses. For many, if not most, small businesses payroll is the biggest expense and any significant increase can eat up profits. That is what many who advocate the $15 minimum wage don't understand. I saw an article the other day about a restaurant chain that went out of business in one of those areas where they've already implemented the $15 minimum wage. Increasing expenses like this for small businesses will put more of them out of business and it benefits the large corporations who can afford to absorb these expenses until the competition is reduced and they can inrease their prices. If you want fewer small businesses and more Walmarts and Amazons, this is the way to do it. Anyway, I'll get off that soapbox, the point is, the "50 cents per week" just seems to be a bold-faced lie, according to my math, which may not be right, you tell me.
ReplyDeleteOkay, after going back an rereading, which I should have done before posting, I see that's a "50 cents per year" increase spread out over a number of years. That's better, but still, because it is a percentage, in the end, will result in a not completely insignificant increase for low wage workers and an increase in payroll expenses for small businesses. I think eliminating the cap and taxing all income is the better way to go. But, those with the higher incomes have a larger voice in these things, don't they?
ReplyDeleteJust change your compensation package away from direct cash payment to stock options or other income streams and there goes the whole idea of taxing high wage earners. Think they wont find a loophole, get serious.
ReplyDeleteI can't make the 50 cents per week work at all. If someone makes $500 a week, 1.2% of that is going to be $6.00. If someone were to earn $41.66 per week they would only see a 50 cent increase. Maybe it's 50 cents per week for each .001 that the tax rate is going up. That works out but is not exactly clear nor very honest.
ReplyDeleteNo doubt this bunch will find a loophole. They won't alter any views until it's in their long term best interest to stabilize the system again. We are one major economic downturn away from something akin to a 21st century Great Depression. We are back in a boom bust economic situation and a small percentage of the population control most of the wealth just like a hundred years ago. Keep cutting the middle and working class and creating mass insecurity. The homeless are piling up in the major cities now. One big economic downturn with a Fed that's out of ammo and the remaining spending power of the masses will be shot. Who will buy the products? Are we going to incarcerate or send to poor houses 80% of the population. Keep slashing. Greed for a lack of a better word is good, at least until the shit hits the fan.
ReplyDeleteAs Charles wrote, this is not going to pass. The reason for proposing it is political - it is a solution to the projected funding shortfall by some Democrats. The Republican solution is to cut benefits, which is very unpopular, so I don't expect them to come up with a competing proposal. If and when the Democrats do regain power, I wouldn't expect them to pass this. The wealthy will still be running the country (as always), and they hate taxes on themselves. But maybe with enough pressure (including the threat of taxes on themselves) they would consent to the payroll tax increases (which they currently oppose, preferring cuts or better yet privatizing the system so they can profit from it). That's a lot better than cuts.
ReplyDelete