Washington is going through major changes in the wake of the 2018 election, with Democrats taking control of the House of Representatives for the first time since 2010. As a result, many proposals on key issues that have gone nowhere for years are suddenly getting new life, and even with divided control of the government, it’s possible that some of those proposals could get some forward momentum. One such proposal is Social Security reform propsed by Rep. John Larson (D-Conn.).
Rep. Larson has submitted a Social Security proposal on multiple occasions in previous sessions of the federal legislature, and has said he will present another version of it in the current congressional session. Some of the attributes include:
- An immediate increase in Social Security benefits equal to about 2% of the average benefit amount for current and new Social Security participants.
- The current measure of inflation would be replaced by the CPI-E, an inflation benchmark that incorporates goods and services that are more appropriate for the older Americans who are the primary recipients of Social Security benefits.
- A minimum benefit set at 25% above the federal poverty line to ensure that low-income workers avoid poverty in retirement.
- Higher income thresholds for tax-free benefits, with the income levels at which a portion of Social Security can become included in taxable income rising from $25,000 to $50,000 for single filers and from $32,000 to $100,000 for joint filers.
Those extra benefits will cost money, and the Social Security 2100 Act has two primary sources of new revenue for the program: Collection of Social Security payroll taxes on wages and self-employment above $400,000 and a phase-in of higher payroll tax rates for Social Security, which would eventually take the current level of 6.2% up to 7.4% by 2042.
Larson’s proposal didn’t go anywhere in previous sessions, but this time the Connecticut representative is chair of the Social Security subcommittee to the powerful House Ways and Means Committee, giving him the power to hold hearings on the legislation and call votes that will send the bill to the floor of the full House. It's even possible that the Social Security 2100 Act will get an approval vote. In the end, the Senate is unlikely to adopt the legislation in anything close to its current form. Higher payroll taxes and a boost to the wage base are two areas where Republicans vehemently disagree with Democrats. Nevertheless, as key dates for sustaining Social Security’s financial health get closer, there’ll be more discussion about issues surrounding the program. Even if it doesn’t get across the finish line, the Social Security 2100 Act is going to get a whole lot closer than it has in recent years.
You can find the full article on The Motley Fool.