Social Security Legislation
On January 30th, Representative John Larson (D-CT) introduced the Social Security 2100 Act (H.R. 860), in the House of Representatives. This bill has 202 co-sponsors – all Democrats.
H.R. 860 would make major changes to Social Security, including increasing benefits and requiring additional contributions from employees and employers. Under this legislation:
- Social Security benefits would be increased for all recipients by an amount equal to 2% of the average benefit;
- The annual cost of living adjustment (COLA) formula would be enhanced to more accurately reflect the costs incurred by seniors, particularly health care costs;
- There would be a new minimum benefit which would be set at 25% above the poverty line;
- Individuals would only be taxed on Social Security benefits if non-Social Security income exceeded $50,000 for individuals or $100,000 for couples (today the income levels for taxing Social Security are $25,000 and $32,000).
BUT all these additional benefits would come at a cost.
Today no payroll taxes are imposed on wages over $132,900. This legislation would continue to impose payroll taxes on wages up to $132,900 but would also then start imposing payroll taxes again on all wages above $400,000. According to the bill’s summary, this new imposition of payroll taxes on wages above $400,000 would only affect the top 0.4% of wage earners.
The contribution rate for the employee and the employer would gradually increase beginning in 2020 through 2043 from 6.2% to 7.4%.
Even though the summary of the bill makes it seem as if this change would cost the majority of workers almost nothing (it claims 50 cents a week for the “average worker”), the impact on businesses could be significant because these employer would be paying in at the higher rate for all of their employees. While the summary is looking at the cost from the viewpoint of an “average wage” income earner, the cost to the business is likely to be quite significant. The employer cost is not addressed at all in the summary.
The additional contributions that the bill would require from employees and employers are intended to ensure the solvency of the Social Security Trust Fund for the next 75 years, even with the increased benefits.
On the other side of the Hill, Senator Bernie Sanders (I-VT) has introduced the Social Security Expansion Act (S. 478) which is quite similar to H.R. 860. Rather than restarting payroll taxes on wages above $400,000, this legislation would start imposing payroll taxes on wages above $250,000. Senator Sanders claims this will not affect 98.2% of all wage earners.
S. 478 would also increase benefits for low-income workers by about $1,300 a year and would also establish a new minimum benefit equal to 125% of the poverty line. Moreover, it would restore student benefits for children of disabled or deceased workers up to age 22 for full time students enrolled in a college or vocational school (this benefit was eliminated in 1983). Finally, it would make the same change to the COLA as H.R. 860. This bill has only four co-sponsors, all Democrats.
The Washington Post’s editorial board waded into the discussion with an editorial on February 21st, in which they argued that it did not make sense to increase the Social Security benefits for so many people who are already “perfectly comfortable” as they contend Congressman Larsen’s bill would do. Rather, they argue that a better fix would be to retain the current COLA for the 30% of workers with the lowest lifetime earnings while reducing the COLA for the top 70%. According to the Congressional Budget Office (CBO), by 2048 the impact of the reduced COLA would drop “Social Security’s total claim on national output… from its current 6.3% level to 5.7%.” The CBO calls this proposal “progressive price indexing.” The Post’s editorial board believes that this proposal will leave more funds to be spent on children who are almost twice as likely to be poor as senior citizens. Obviously, the change suggested by the Post is a relatively simple fix compared to the major overhaul contemplated by the two bills recently introduced on the Hill. It also would not increase benefits which, at least based on the number of co-sponsors to H.R. 860, appears to be a major policy driver for the Democrats.
It is likely that changing Social Security will be a priority of this Congress. The SBLC will be actively monitoring this issue and taking part in that discussion and we urge our members and their members to share their thoughts on this issue with us.
2019 Legislative meetings
April 23, 2019 - ICBA offices – 1615 L Street, NW, Suite 900
June 4, 2019 - ICBA offices – 1615 L Street, NW, Suite 900
August 15, 2019 – Conference Call
October 1, 2019 - ICBA offices – 1615 L Street, NW, Suite 900
All meetings run from 10:00 AM to 12:00 noon