While talk regarding Social Security throughout recent years has centered on cutting benefits to help address a looming solvency challenge, Democrats in Congress introduced a bill this week that aims to expand them.
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Called the Social Security 2100 Act, the bill would provide a 2 percent increase in the average benefit for all recipients, reform the cost-of-living adjustment formula, increase the minimum benefit to 25 percent above the poverty line and reduce income taxes on benefits. Sponsors estimate 12 million Social Security recipients would see a tax cut under the last provision, which aims to raise the non-Social Security income threshold at which people are taxed to $50,000 for individuals (from $25,000) and $100,000 for couples (from $32,000).
The legislation also addresses the program’s funding problems by adding new payroll taxes – on wages over $400,000. Under the current law, Americans only pay taxes on the first $132,900 they earn. The contribution rates for both employees and employers would also gradually increase to 7.4 percent by 2042, from the current 6.2 percent.
Democratic Connecticut Rep. John Larson, who introduced the bill, said the tax increase would amount to 50 cents per week for the average worker.
Larson introduced similar legislation that failed in 2015. However, the bill already has 200 co-sponsors in the House – where it needs 218 to pass.
While the bill is not likely to make meaningful headway in the Republican-controlled Senate, Democrats, who took control of the House of Representatives during the 2018 midterm elections, could hold hearings on expanding benefits for the first time in nearly half a century, as reported by Reuters.
Social Security, in its current form, is facing a funding shortfall. Recipients will have their benefits cut after 2034 unless Congress takes action to make changes to the system. According to the annual Social Security and Medicare trustees report, after 2034, the program will only be able to cover about 79 percent of benefits.
Another strategy that has been floated to address that shortfall involves cutting the program’s benefits.
In 2019, the Social Security cost-of-living adjustment – 2.8 percent – was expected to boost the average beneficiary’s check by about $39 per month.
It will raise the current maximum benefit collected by someone who retires at full retirement age – age 66 for people born in 1943 through 1954 – by about $78 per month. About 67 million Social Security and Supplemental Security Income beneficiaries will be impacted.
The AARP and the Alliance for Retired Americans warned the 2.8 percent jump in benefits would not be enough to keep up with increasing expenses related to health care, housing and prescription drugs, presenting a challenge to the many people who rely on the checks to live.