On the day Congress recessed for the summer, bipartisan legislation was introduced in the U.S. House of Representatives that would substantially increase the current payroll cap on Social Security taxes.
The Save Our Social Security Act, introduced by Rep. Reid Ribble (R-Wis.), has four other Republican cosponsors, along with one Democrat.
Under existing law, the 12.4% Social Security tax applies to the first $118,500 of earners’ wages. The S.O.S. Act would raise that to $156,550 for fiscal year 2017, $194,600 in 2018, $232,650 in 2019, $270,700 in 2020, and $308,750 in 2021.
The proposed legislation would also raise full retirement from age 67 to 69, which would be phased in beginning in 2022 over the course of the subsequent 12 years. The maximum retirement age would be increased from 70 to 72.
Those provisions, along with changes to how benefits are calculated, and how cost of living adjustments are indexed to inflation, would put the Social Security program on the road to solvency, “with all scheduled benefits fully payable on time” during a 75-year projection period, according to actuaries at the Social Security Administration, which scored the proposed legislation.
SSA’s latest trustee report shows that, under existing law, beneficiaries can expect a 21% reduction in scheduled benefits beginning in 2034, when the combined trust fund reserves of the Old-Age and Survivors Insurance, or OASI program, which pays benefits to retirees, and the Disability Insurance program, which covers disabled workers and its beneficiaries, are depleted.
Calls to address Social Security’s solvency issues with tax increases have been common from Democrats over the past decade.
But Republican lawmakers have focused proposals on partially privatizing the Social Security trust fund to give individuals greater control over how their Social Security taxes are invested.
Reaction From Chamber, Policy Experts
In the days after Ribble’s legislation was introduced, Bruce Josten, vice president for government affairs at the U.S. Chamber of Commerce, was strongly supportive of the Republicans’ effort to advance the debate on Social Security reform.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
