Social Security can pay out full benefits until 2035 without any intervention, but Sen. Bernie Sanders’s latest proposal would extend the life of the program for another 75 years, chief actuary Stephen Goss said.
In a letter in response to Sanders’s request for review of the Social Security Expansion Act, Goss said the nine provisions the senator and his colleagues laid out would allow Social Security’s two programs – for retirement and disability benefits – to pay out scheduled benefits “in full and on time” for 75 years. Sen. Elizabeth Warren, a Democrat from Massachusetts, and Democratic representatives Jan Schakowsky, from Illinois, and Val Hoyle, from Oregon, joined Sanders in introducing the legislation on Monday.
This isn’t the first time the Vermont Independent has proposed this bill. He also introduced it in 2022, but it received no traction in Congress.
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The two trust funds that support Social Security’s retirement and disability benefits are on track to run out in the next 12 years, at which point beneficiaries would see a 20% cut to the checks they’re owed. By 2096, that cut would increase to 26%, Goss said in his letter. Under this proposal, however, benefits would be fully paid for the next 75 years, and the deficit from the current payroll structure would drop from 3.42% to 0.12%, he added.
The Social Security Expansion Act aims not only to pay out full benefits, but – as the name implies – stretch the program further. In the proposal, Social Security would give an additional $2,400 in benefits every year to each beneficiary. The program would also be linked to the consumer-price index for the elderly (CPI-E) as opposed to CPI-W, which tracks the costs of goods and services urban workers use (the switch would change cost-of-living adjustment to align more closely with older Americans’ spending).
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The proposal includes applying two new taxes: one 12.4% tax on investment income for individuals earning $250,000 per year, and another 16.2% net investment income tax for specific business owners, including active S-corporation holders and active limited partners (the latter tax would be divided among retirement and disability benefits as well as the general Treasury fund).
Some changes would be enacted as early as 2024 if the proposal was signed into law.
Social Security is often referred to as the third rail in politics because it’s so charged it’s considered untouchable. Traditionally, Republicans have suggested benefit cuts or increased beneficiary ages to fix the insolvency issue while Democrats have looked to expand the program. During his State of the Union speech this month, President Biden elicited a strong response to fix the program and “stand up for seniors” from legislators on both sides of the aisle.
Credit: marketwatch.com