Biggs Summer Social Security is the largest domestic federal program. It is funded by the largest tax paid by most workers, and is the largest source of income for most retirees.
This cap generally increases every year as the national average wage increases. Today, the cap covers about 83 percent of total earnings in the nation. How much depends on how high the cap is set and how quickly the cap would be raised to reach that level.
Raising the cap to 90 percent would fill an estimated 29 percent of the funding gap. Lifting the cap to cover 90 percent of all earnings is sensible and fair. It is fair for top earners to pay more into Social Security, and they would get a bit more in benefits.
This change reflects the intent of Congress inwhen it set the cap to include 90 percent of earnings. Congress also provided for automatic adjustments for average wage growth so that the cap would continue to cover 90 percent. This proposal, together with other changes, could keep Social Security strong and pay for benefit improvements.
The tax increase would also discourage some Americans from working more and thereby hurt our economy. The self-employed and certain smaller business owners would be hit particularly hard. This cap generally increases every year with increases in the national average wage.
Today, the cap covers about 83 percent of total earnings. If you make above that amount, you as well as your employer would pay the 6. If all earnings were immediately subject to the Social Security tax, the new revenue would fill an estimated 71 percent of the funding gap.
They would pay on all their earnings throughout the year just as everyone else does, and would get a modest increase in benefits.
Combining this with other changes could wipe out the gap and pay for needed benefit improvements. This proposal may sound like an easy and attractive solution, but it would make all Americans worse off by hurting the economy. High-earning workers, including the self-employed and certain business owners, would face very high marginal tax rates, discouraging them from working more, hiring additional workers or expanding their businesses.
Eliminating the tax cap immediately would cause Social Security surpluses in the early years after this change. Those surpluses would encourage higher spending by Congress on other programs through further borrowing from Social Security.
While higher lifetime earners receive higher payments than lower lifetime earners, their benefits replace a smaller share of their past earnings than do the benefits provided to lower earners.
Most options use a sliding scale to reduce the benefits most for higher earners, make smaller changes for middle earners and make no benefit changes for lower earners. Reduce benefits for the highest-earning 25 percent.
Gradually reducing benefits over time for roughly the highest-earning 25 percent of individuals by a sliding scale up to an 8 percent benefit reduction for maximum earners would close an estimated 3 percent of the funding gap.
Reduce benefits for the highest-earning 50 percent. Gradually reducing benefits over time for the highest-earning 50 percent of individuals by a sliding scale up to a 31 percent benefit reduction for maximum earners would fill an estimated 33 percent of the funding gap.
Social Security has promised more benefits than it can afford to pay in the future. Everyone would continue to receive benefits, but higher earners would receive less than they do today. Most seniors get most of their income from Social Security.
Cuts are not the answer.5 Ways to Reform Social Security.
The spectre of insolvency is troubling, but all reform options present serious drawbacks. Living longer means being able to pull a benefit check for a longer period of time, further hampering the program. 15 ways to save Social Security. So what should be done to save Social Security?
That's the great question that lawmakers on Capitol Hill can't seem to figure out. However, they're certainly not hurting from a lack of ideas. I urge my colleagues to also put pen to paper and offer their ideas about how they would save Social Security for generations to come.
Americans want, need, and deserve for us to finally come up with a solution to saving this important program.”. A better way Instead of enacting one big, draconian change to save Social Security, the president and congress could restore solvency to the system by combining several smaller, less painful fixes.
United States House of Representatives. I am writing in response to your request for estimates of the financial effects on Social Security of H.R. , the Social Security Reform Act of , which you introduced today. The estimates The annual balance (non-interest income minus program cost) under the proposal is slightly worse (more.
Recalculate the COLA. Social Security benefits generally keep up with inflation through a cost-of-living adjustment, or COLA. Since , Social Security has based such adjustments on the consumer price index, which measures changes in the prices of consumer goods and services.