Social Security (House) Proposal

[TickTock]

You Earned It, You Keep It

There is a proposal in the House to eliminate federal taxes on SS, paying for it by increasing the SS tax base from 2024's $168,600 to "over $250,000" (what exactly that means I'm not sure and haven't been able to find out with my online research...) which is projected to not only pay for the proposal but also provide full payments through 2054 (vs. the current projection of 2034).

https://www.kiplinger.com/taxes/will-tax-on-social-security-benefits-be-eliminated

The bill: https://craig.house.gov/sites/evo-s.../files/evo-media-document/craig_035_xml17.pdf

I admit, I am unable to wade through the 18 pages of legalese in the bill. Can anyone here who is more skilled in legalese translate it into English?

You'd think that SS proposals would have more bandwidth than this.

 

[Aerides]

Lots of bills get proposed and go nowhere. Any word on when this is expected to make it out of committee? That's usually the first sign of life.

 

[TickTock]

It doesn't seem likely to get out of committee. My biggest surprise on this is that there isn't more buzz on it.

 

[GenXguy]

I saw that news story show up a couple different times a while back. It's not worth thinking about at this point. It probably won't go anywhere. Just something else trying to get people to click the link.

 

[Car-Guy]

The cynic in me wonders "will it give significantly more money to the plan participants"? If yes, it will die in committee. If it only gives participants a few dollars, it will probably pass since the politicians can claim "see what I did for the seniors".

 

[RetiredAt55.5]

I guess I don't understand why the focus isn't ONLY on shoring up the Social Security coffers, so everyone doesn't have to take an automatic 20-25% cut around 2034.

I've read in the past that just increasing the SS tax base limit wouldn't bring in enough money to do just that.

 

[RetiredHappy]

I would rather they remove the SS contribution limit and not eliminate federal taxes on SS to shore up the trust fund. Instead of eliminating federal taxes on SS, they should have those taxes go back to SS trust fund, if they are not already doing so.

 

[dmpi]

Something needs to be done. I believe in sharing the pain across all generations. People that are already collecting should give something up along with the people that are still working and contributing.

 

[Sunset]

Something needs to be done. I believe in sharing the pain across all generations. People that are already collecting should give something up along with the people that are still working and contributing.

And they should have a choice: Breakfast / Lunch / Dinner..

There are many more seniors that live solely on SS than many people realize.

We could fix SS by reducing general income tax by 1% and allocate that 1% to SS in addition to existing SS taxes. There is no tax increase over all, SS gets a boost, and fewer Pork Projects by Congress have funding.

 

[GenXguy]

Instead of eliminating the federal tax on SS benefits, they should just index them to the levels from 1983 when the new tax thresholds were set. The way it is, the taxes are being increased every year benefits are increased while the tax thresholds remain static.

And yeah, cutting benefits for those already over 55 years old who actually earned those benefits sounds like a bad idea. It would make more sense to cut spousal benefits that were never earned.

 

[VanWinkle]

I recently listened to a podcast by a financial advisor that indicated a fairly simple cure for the shortfall in Social Security coming in 2033. The cola increases are costing much more than anticipated. Instead of COLA increases, tying the increases to the same annual wage index that is used prior to age 62 for benefits, this would take care of 70% of the shortfall.

From the SS site:

We use the national average wage index to "index" earnings for initial benefit computations and to determine several wage-indexed amounts that primarily affect the OASDI program.
COLAs provide annual increases in payments from OASDI and SSI programs.

This makes sense to me and would change the increases by small amounts for each person, but save billions when compared to the current system.

VW

 

[VanWinkle]

Instead of eliminating the federal tax on SS benefits, they should just index them to the levels from 1983 when the new tax thresholds were set. The way it is, the taxes are being increased every year benefits are increased while the tax thresholds remain static.

And yeah, cutting benefits for those already over 55 years old who actually earned those benefits sounds like a bad idea. It would make more sense to cut spousal benefits that were never earned.

+1 to the first part, and -1 to the second part.

VW

 

[USGrant1962]

I would rather they remove the SS contribution limit and not eliminate federal taxes on SS to shore up the trust fund. Instead of eliminating federal taxes on SS, they should have those taxes go back to SS trust fund, if they are not already doing so.

Income taxes on SS do go into the trust fund. It was part of the 1983 fix.

 

[Midpack]

It’s not going anywhere and it shouldn’t IMO. Retirees hold much more net worth than workers already. It extends solvency to 2055 or so, by eliminating taxes on Soc Sec (for the 40% who currently pay) by increasing the cap on weathier income earners - in a strange way by some reports? Reportedly you don’t pay more between the 2024 cap of $168,600 and $250,000, but above $250,000 you do pay 6.2% again.

 

[USGrant1962]

The bill was introduced in the last Congress and went nowhere.

https://www.govtrack.us/congress/bills/117/hr8717

It has been re-introduced with probably the same fate.

https://www.govtrack.us/congress/bills/118/hr7084

 

[AudiDudi]

Increase FRA to 68
Eliminate the income cap
Add 2 more bend points at around 8% and 4%
Use the top 38 years of earnings vs the current 35 years.

 

[Midpack]

Increase FRA to 68
Eliminate the income cap
Add 2 more bend points at around 8% and 4%
Use the top 38 years of earnings vs the current 35 years.

Sure is easy when you have no skin in the game…

 

[AudiDudi]

Sure is easy when you have no skin in the game…

Sure is - but I really don't want the haircut in the 2034 time frame. OFC those policy changes would need to be slowly, over time put in place.

 

[target2019]

This proposal goes under the heading, "We're working on something."

 

[TheWizard]

Income taxes on SS do go into the trust fund. It was part of the 1983 fix.

I wonder how they compute that.
If SS is 30% of my AGI, does 30% of the Tax I pay go to the trust fund?

 

[GenXguy]

I recently listened to a podcast by a financial advisor that indicated a fairly simple cure for the shortfall in Social Security coming in 2033. The cola increases are costing much more than anticipated. Instead of COLA increases, tying the increases to the same annual wage index that is used prior to age 62 for benefits, this would take care of 70% of the shortfall.

Oh no, that would just be continuing cut to SS benefits to seniors who are already having a hard time keeping up with the current insufficient increases to pay for their increasing expenses, Medicare premiums, health care out of pocket costs, etc. along with more SS benefits getting taxed.

I think cutting spousal benefits would be much more fair and actually have their SS benefits be based on their own earnings like the rest of us.

Raising the earnings cap for SS tax and slowly raising the retirement age for workers in their 50's and younger will help as well.

Someone's suggestion about another 1% of earnings going to SS would be helpful as well.

Some retirees have pensions and can handle the big cuts in SS, but too many are struggling to get by, especially with the high inflation in recent years and rising health care costs.

 

[GenXguy]

I wonder how they compute that.
If SS is 30% of my AGI, does 30% of the Tax I pay go to the trust fund?

No. For one, SS is never 100% taxable. But it makes sense that it would be the actual tax paid on your SS benefits, which up to 80% of SS benefits are taxable. And it's taxed as ordinary income, not like LTCG which you may be paying taxes on.

 

[RetiredHappy]

Increase FRA to 68
Eliminate the income cap
Add 2 more bend points at around 8% and 4%
Use the top 38 years of earnings vs the current 35 years.

Increase FRA to 68. Who wants to work longer? Almost no one.

Eliminate income cap. Littile objection, even for higher income earners. I know when I was making high 6 figures, more taxes was just noise.

Add 2 more bend points around 8% and 4%? Adding complexities does not make it better.

Use top 38 years of earning. Again, who wants to work longer? Almost no one.

 

[Wile E. Coyote]

They might do something in 2034 at midnight the night before the cuts must take place.

 

[GenXguy]

Use top 38 years of earning. Again, who wants to work longer? Almost no one.

And if you already retired at 35 years playing by the current rules, you're getting screwed after that fact. I think any big changes in retirement age or working years should be brought in slowly enough that workers have plenty of working years left to plan and save as needed. The 25% haircut that happens by default should absolutely never be allowed to happen, especially for those without pensions who are more reliant on it.