Social Security is a social program, meaning that the people working tomorrow are paying for the people retiring today. There is a misconception among many seniors that you get back what you pay into the program. That is incorrect. Our benefits are based on several things but primarily our income history and our age when we claim. That said, there is a call to limit Social Security taxes taken out of our benefits with new Social Security legislation hitting the Congressional floor, as GoBaningRates.com’s Selena Fragassi reports.
New Social Security Legislation
New Social Security legislation often works its way through Congress; however, it is also stalled just as often. Legislation is notoriously difficult to pass in today’s modern legislative system. There are some noted exceptions, like the Inflation Reduction Act, which offers Medicare protections for seniors and passed the House and Senate in record time. It depends on the bill, what it does, and who sponsors it.
One new piece of potential legislation, known as the “You Earned It, You Keep It” Act is seeking to eliminate federal tax contributions taken from Social Security benefits. The proposed bill would work to help seniors struggling with high inflation-related prices. While withdrawing federal taxes would cause a revenue deficit, the bill would propose raising the payroll tax cap for workers earning more than $250,000 a year. The current cap is $142,000.
Regardless of what new Social Security legislation passes or is stalled, insolvency needs to be dealt with now. Current projects suggest that the Social Security Trust, the fund that fuels investments and financing back into the program will be out of money within the next 15 years. If that were to happen, then Social Security beneficiaries would see a 20 to 30 percent cut to their benefits, regardless of class or age.
The You Earned It, You Keep It Act’s payroll tax cap increase would provide enough funds to keep the Trust solvent for approximately 25 more years. Fixing Social Security will take a bipartisan effort, and will need to be people led if Congress is to make any kind of progress in the time we have to work with.
Whether we pass this legislation or something similar, insolvency cannot be allowed to happen.
For more Social Security news make sure to follow the Council for Retirement Security.