Lawmakers and Social Security advocates sparred Thursday over the benefits and drawbacks of the Social Security 2100 Act — legislation that would increase benefits by raising payroll taxes — with Rep. Kevin Brady, R-Texas, arguing that “millennials get ripped off” in the bill.
The legislation, which was introduced on Jan. 30 by Rep. John Larson, D-Conn., and got its first full hearing before the House Ways and Means Committee on Thursday, would gradually raise the payroll tax from 12.4% to 14.8% over the next 24 years and subject annual income above $400,000 to the tax.
The 2100 Act would also raise the minimum benefit to 25% above the poverty line, link cost-of-living adjustments to the Consumer Price Index for the Elderly and eliminate the taxation of Social Security benefits for those with non-Social Security income above $50,000 for singles and $100,000 for couples, up from $25,000 and $32,000 currently.
Rep. Richard Neal, D-Mass., said in his opening remarks that the Social Security 2100 Act “is fully paid for. It asks the most fortunate among us to pay their fair share. And it asks everyone to pay slightly higher premiums so that Social Security can remain strong.”
Some on the other side of the aisle “complain about that premium increase, or about asking the most well-off among us to pay their fair share,” Neal said. “They may say they want to ‘reform’ Social Security instead.”
Neal argued that “when Republicans say they want to ‘reform’ Social Security, what they are actually talking about is cuts in Social Security benefits, such as raising the retirement age and other benefit cuts.”
The Social Security 2100 Act, however, includes “no cuts in benefits. I repeat: It ensures everyone receives their full benefits, with no cuts,” Neal said.
Stephen Goss, chief actuary for the Social Security Administration, told the committee that according to the Social Security Trustees’ 2019 report, the annual cost of Social Security — formally called the Old Age, Survivors, and Disability Insurance Program — will begin to rise above the annual income starting in 2020 “due to the aging of our population.” The combined OASDI Trust Fund reserves are on track to be depleted in 2035. If that were allowed to happen, continued revenue would be sufficient to pay only 80% of benefits currently scheduled in law in 2035, declining to 75% by 2093, Goss said.
“Enacting adjustments to revenue and/or scheduled benefits soon will allow more options, more gradual implementation, and more advanced notice to those who will be affected,” Goss said.
The Social Security 2100 Act “would eliminate the 75-year shortfall and achieve what we refer to as sustainable solvency, meaning that the Social Security program will be projected to be fully solvent for the foreseeable future — 75 years and even beyond,” Goss said.
Nancy Altman, president of Social Security Works, a group that supports expanding the Social Security system, told the lawmakers in her testimony that the Social Security 2100 Act restores Social Security’s “actuarial balance.”
The Social Security 2100 Act “recognizes the importance of across-the-board benefit increases to solve” the retirement crisis and rising income and wealth inequality, Altman argued.
“Increasing Social Security’s modest benefits, enacting a more accurate cost of living measure, and updating the so-called special minimum benefit, as the Social Security 2100 Act does, are solutions to the looming retirement income crisis facing America’s retired workers and the increasing economic pressure on working families,” she said.
Brady, ranking member of the committee, argued however that the bill forces young people to “struggle with smaller paychecks their entire working lives.”
The Social Security 2100 Act “harms young workers, hurts small businesses and slows our American economy,” Brady said, adding that the bill “is a secret $19 trillion tax increase on workers and small businesses.”
Citing the nonpartisan Joint Committee on Taxation, Brady continued:
“Instead of helping you, this bill forces you cough up another $50,000 in payroll taxes to bankroll benefits for seniors and the wealthy — cutting your lifetime income by more than 2% over your career.
“That’s because you may not get as much back as you put in, leaving our younger generation worse off. Millennials get ripped off in this bill.”
Brady also said that working families “with both working spouses will face a yearly tax increase of $2,100” under the bill.
“And a single mom with two kids, who today under our new tax code doesn’t pay a penny in federal income taxes on the first $53,000 on her income, will see her paycheck cut by $1,344 each and every year,” Brady said.
“Your grandkids get mugged. To give your grandma a mere $32 more a month in her social Security, a low-earning grandchild will pay over $53,000 in higher payroll taxes. Middle-class young people will pay even more,” Brady argued.
Shaun Castle, deputy executive director for Paralyzed Veterans of America, and a millennial, stated, however, that the Social Security 2100 Act “recognizes that, like most insurance plans, premiums have to increase from time to time,” and gradually phases in an increase in the contribution rate so that by 2043, workers and employers would pay 7.4% instead of 6.2% today.
“At the April hearing, some decried the adverse impact this would have on young workers who would eventually pay an additional $600 on earnings of $50,000 a year,” Castle told the lawmakers. “Overlooked was the increase in subsequent Social Security benefits that would accrue to those millennials in retirement under the Social Security 2100 Act. For the average worker this would mean paying an additional 50 cents per week during the phase-in period to keep the system solvent. As a millennial, I’m willing to pay an additional 50 cents per week to keep the system solvent.”
— Related on ThinkAdvisor: