What is the Social Security 2100 Act

What is the Social Security 2100 Act?

The Social Security program has had a deficit every year since 2010 and by 2034, the program is projected to become insolvent.

Many experts believe that Social Security is in crisis. There have been proposals from both sides of the aisle to shore up its long-term finances and guard against the danger of major benefit cuts in the future. With over 200 original cosponsors, the Social Security 2100 Act is proposed legislation set forth by congressman John B. Larson to raise payroll taxes in order to expand Social Security benefits and keep it solvent through the end of the century. The Act was designed to reduce taxes on low and middle income families while providing lower wage and middle class workers with increasing support from Social Security. 1,2

Larson’s proposal didn’t go anywhere in previous sessions, but this time is different. That is because the Connecticut representative is likely to assume the role of chair of the Social Security subcommittee to the powerful House Ways and Means Committee, giving him the power to hold hearings on the legislation and call votes that will send the bill to the floor of the full House. 5

This bill will provide increasing benefits to be paid out to low-wage workers. Modifications to the benefit formula will ensure that even lower wage Americans will receive benefits that are equal to or 125% of the federal poverty level. By tying benefits to wage levels, minimum Social Security payouts would be calibrated to provide a beneficiaries with an adequate income. 1,2,4

According to this bill, tax cuts for Social Security beneficiaries will benefit those with non-Social Security income exceeding $50,000 for individuals and $100,000 for couples. Currently, retired individuals are taxed on non-Social Security income exceeding $25,000 and couples are taxed on income in excess of $32,000. 2

SSI, Medicaid, and CHIP beneficiaries won’t lose benefits or eligibility due to increases in Social Security benefits. 2

A 2% increase in benefits will be applied to all current and future Social Security beneficiaries. 1,2

More accurate cost of living indices will be used to determine cost of living increases for Social Security which will buffer seniors from inflation. These cost of living measures weight the importance of rising healthcare and housing costs more heavily since these costs disproportionately affect the elderly. 1,2

The Social Security Act will ensure that millionaires and billionaires pay the same tax rate as other taxpayers. Currently, payroll taxes are collected only on wages up to $132,900. The new legislation applies payroll taxes above $400,000 affecting only the top 0.4% of wage earners. 1

Over the course of 20 years, payroll taxes will increase and eventually, all wages will be subject to payroll taxes. 3

By combining both the Old-Age and Survivors (OASI) and Disability Insurance (DI) trust funds into one Social Security Trust Fund the Social Security Act will ensure that all beneficiaries are paid.

According to this plan, current voters are rewarded at the expense of non-voters who have not yet entered the workforce. An average 11-year old will pay 10-15% higher lifetime payroll taxes as a result of this bill. 3

In the end, the Senate is unlikely to adopt the legislation in anything close to its current form. Higher payroll taxes and a boost to the wage base are two areas where Republicans vehemently disagree with Democrats.5

1 - thehill.com/blogs/congress-blog/economy-budget/328516-social-security-2100-act-a-commonsense-approach-to-achieve

2 - larson.house.gov/social-security-2100

3 - www.fixssnow.org/contentdetails_The-Social-Security-2100-Act_98.aspx

4 - www.forbes.com/sites/nancyaltman/2019/01/30/a-huge-step-forward-in-the-quest-to-expand-social-security/#5c8c3df16849

5 - www.fool.com/retirement/2019/01/21/this-social-security-reform-bill-could-be-back-on.aspx