How Everyday Americans Would Fix Social Security

Bipartisan Support

The report suggests that Americans are “notably united” across political, income, education and generational lines when it comes to Social Security. They also have broadly shared views about their preferred path for the program’s future.

Eighty-one percent of respondents who are not receiving benefits stated that Social Security will be important or very important to their monthly income when they retire, while just 4% said it would not be important.

An even higher proportion, 85%, said that the government should ensure that benefits are not reduced, or should be increased, even if it means raising taxes on some or all Americans.

“This broad preference for raising revenues versus reducing benefits cuts across political, income, education and generational lines,” the authors emphasize. “Among Republicans, more than three in four prefer increasing revenues to benefit reductions, with more than nine in 10 Democrats and more than eight in 10 independents sharing this preference.”

Plethora of Policy Options

Of the policies tested in the survey, Americans most strongly preferred lifting the payroll tax cap to raise needed revenue.

Respondents also strongly supported increasing the payroll tax rate from 6.2% to 7.2% for both employers and employees if it helped to ensure solvency and maintain current benefits.

Changes that would result in lower benefits, such as raising the retirement age or modifying cost-of-living adjustments, had much less support. Instead, Americans prefer a package that fully eliminates the financing gap and makes targeted improvements to benefits.

“The trade-off analysis finds that, compared with the status quo, 82% of respondents prefer a package of changes that increases revenues, pays for targeted benefit improvements, and eliminates the financing gap,” the report states.

Preferred Package

The preferred package identified by the report, generated through a granular trade-off analysis completed by the respondents, would do six things.

First, as noted, it would eliminate the payroll tax cap for earnings above $400,000. The existing cap — currently at $176,100 — would be preserved, while those making more than $400,000 per year (and their employers) would contribute to Social Security via payroll taxes on wages above that amount. Those affected would not receive additional benefits.

Next, the payroll tax rate would “gradually rise” from 6.2% to 7.2% for both employers and employees. A worker earning $50,000 per year would contribute an additional $42 per month once the 7.2% rate is reached, according to the report. This policy option was nearly as popular as reforming the payroll tax cap.

Third, the package would modify the annual cost-of-living adjustment to more accurately reflect inflation and the spending habits of older Americans, potentially by moving away from the CPI-W in favor of the R-CPI-E, which is a version of the Consumer Price Index tabulated for Americans 62 and older.

Fourth, the preferred package would provide a caregiving credit for people who take time out of the workforce to care for children younger than 6. As the report notes, these workers generally receive significantly lower benefits than others under current law.

Fifth, the package would provide a “bridge benefit” for older workers with a history of physically demanding work, allowing them to claim their benefits earlier without the normal early-retirement reduction.

The final piece of the package would reduce benefits for those with higher incomes in retirement. Specifically, the preferred package would establish the option to reduce Social Security benefits for beneficiaries whose retirement incomes, not including Social Security, are $60,000 or more per year ($120,000 for married couples).

Effect on Solvency

According to the researchers, these six changes together would eliminate Social Security’s projected long-term financing gap while restoring a small surplus.

“This package is preferred over the status quo by eight in 10 respondents across political lines, generations, income and education,” the report states. “The preferred package includes no increase to the retirement age, no across-the-board benefit bump for future beneficiaries, and no change to the current taxation of benefits.”

While the preferred package does include reducing benefits for beneficiaries with significant retirement incomes from non-Social Security sources, that was by far the least popular option. There is an almost even split of opinion on it.

“It is likely that people opted to reduce benefits for those with higher incomes in retirement to create a package that solved the entire financing gap,” the authors explain. “Without that option, the package described above would not have fully closed the gap. This underscores the value of trade-off analysis. It forces respondents to weigh the costs of options holistically versus considering individual options in isolation.”

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