Social Security expansion bill

[bobandsherry]

There's been lots of discussion on Social Security perhaps getting cut due to insolvency issues. This new bill being sponsored would actually reverse that and estimates solvency for next 75 years.

Social Security expansion bill poised to gain traction in Congress, targeting those who earn over $400,000

• The measure, which would expand benefits for current and future recipients, would extend the program’s solvency for 75 years, according to Social Security’s Office of the Chief Actuary.
  
• To help fund the proposed changes, earnings above $400,000 would be subject to Social Security taxes. In 2019, earnings above $132,900 are not subject to the levy.
  
• The payroll tax also would gradually rise to 14.8 percent from the current 12.4 percent by 2043, with workers and their employers splitting that tax as they already do.

 

[gwraigty]

Already discussed in this now-closed thread:

http://www.early-retirement.org/forums/f52/strengthen-social-security-increase-benefits-cut-taxes-for-seniors-96021.html

 

[MichaelB]

Already discussed in this now-closed thread:

http://www.early-retirement.org/forums/f52/strengthen-social-security-increase-benefits-cut-taxes-for-seniors-96021.html

Yes, there is. Hopefully this new discussion can stay on topic and avoid a similar fate.

 

[Independent]

I didn't see any links in the CNBC article.

See Rep Larson's page here: https://larson.house.gov/social-security-2100

It has his summary of the bill and links to the text and to the SS actuaries report.

One issue that directly affects retirees here is the change in taxation of benefits.

Reading section 104 of the bill, and comparing to the current law at: https://www.law.cornell.edu/uscode/text/26/86

I think this would simplify the current formula.

For most people, you would:
1) Add one-half your SS benefit to your other income.
2) Subtract $50,000 (or $100,000 if joint) from the number in (1)
3) Take 50% of the number in (2)
4) Calculate 85% of your SS benefit
5) Your taxable benefit is the lesser of (3) or (4)

I don't see the additional calculation step that we have in the current law.

We currently have $44,000 of taxable SS benefits. It looks like this bill would change that to $0.

But, I could be wrong, this stuff is hard to read.


Also, note that Rep Larson calls this the "Social Security 2100 Act".
There is a different bill introduced by Sanders and DeFazio called "Social Security Expansion Act".

 

[joeea]

Social Security Expansion

There's been lots of discussion on Social Security perhaps getting cut due to insolvency issues. This new bill being sponsored would actually reverse that and estimates solvency for next 75 years.

It's good that Congress is starting to look at Social Security changes.

It's not clear that anything can actually be passed now due to the makeup of the current Congress and the current Administration.

But it could become an issue in the 2020 elections and perhaps changes could actually be passed in 2021 that will extend Social Securities solvency out by 75 years or so.

We can only wait and hope.

 

[Mdlerth]

Thoreau said "Simplify"

For most people, you would:
1) Add one-half your SS benefit to your other income.
2) Subtract $50,000 (or $100,000 if joint) from the number in (1)
3) Take 50% of the number in (2)
4) Calculate 85% of your SS benefit
5) Your taxable benefit is the lesser of (3) or (4)

Tsk, tsk. One more gratuitous, somersaulting calculation full of arbitrary constants which will become victims of either inflation itself or inflation-indexing. Is it any wonder why ordinary people have to use Turbo Tax?

 

[Independent]

Tsk, tsk. One more gratuitous, somersaulting calculation full of arbitrary constants which will become victims of either inflation itself or inflation-indexing. Is it any wonder why ordinary people have to use Turbo Tax?

I'd say that this calculation has less "somersaulting" than the current version.

And I'll note that the $50k and $100k are not inflation indexed in the bill. Of course, that could change.

 

[Crabby Mike]

Is it any wonder why ordinary people have to use Turbo Tax?

Don't forget that Intuit (owner of TurboTax), and undoubtedly others who benefit from tax complexity, continually lobby against any changes in tax laws that would make filing simpler and easier.

 

[Mdlerth]

Mine is a voice crying in the wilderness

I'd say that this calculation has less "somersaulting" than the current version.

And I'll note that the $50k and $100k are not inflation indexed in the bill. Of course, that could change.

Less somersaulting may be better than more, but it's not as good as none.
Seriously, what would be the downside to a tax code with ZERO complications, such that your 1040 would fit on an index card? Why is it that every bill has to include these gymnastics? Sigh...

Don't forget that Intuit (owner of TurboTax), and undoubtedly others who benefit from tax complexity, continually lobby against any changes in tax laws that would make filing simpler and easier.

I don't doubt there are some unholy alliances supporting a system deliberately rigged to confuse the masses. Imagine if they abolished withholding, and when April 15 came everybody had to send in a check? If folks ever realized what they're actually paying, there would be mobs with pitchforks and torches demanding that the madness be stopped. Oh well, I can dream.

 

[Rianne]

I just got a raging headache.

 

[joeea]

Less somersaulting may be better than more, but it's not as good as none.

Sure. But hopefully nobody is actually holding their breath waiting for a postcard-size simplified tax return.

Meanwhile back in the real world, we need to make things incrementally better.

 

[gwraigty]

Sure. But hopefully nobody is actually holding their breath waiting for a postcard-size simplified tax return.

Meanwhile back in the real world, we need to make things incrementally better.

If they make a postcard-size return, I have little doubt it'll come with more forms/schedules. Look at their track record.

 

[pb4uski]

There's been lots of discussion on Social Security perhaps getting cut due to insolvency issues. This new bill being sponsored would actually reverse that and estimates solvency for next 75 years.

Social Security expansion bill poised to gain traction in Congress, targeting those who earn over $400,000

• The measure, which would expand benefits for current and future recipients, would extend the program’s solvency for 75 years, according to Social Security’s Office of the Chief Actuary.
• To help fund the proposed changes, earnings above $400,000 would be subject to Social Security taxes. In 2019, earnings above $132,900 are not subject to the levy.
• The payroll tax also would gradually rise to 14.8 percent from the current 12.4 percent by 2043, with workers and their employers splitting that tax as they already do.

I guess the issue that I have with the bulleted items is that I highly suspect that those with earnings over $400,000 that will be paying additional SS tax will not be getting any additional benefit as a result of the higher taxes that they pay.... so the net impact is nothing more than an increasing taxes on people earning more than $400,000. I would object to that as a matter of equity... not because it would impact me or any family members in any way.

The entire reason that the cap exists is because there is a cap on SS benefits so there is a commensurate cap to the earnings subject to tax to be equitable and the proposed bill destroys that equity designed into the current structure.

 

[Independent]

I guess the issue that I have with the bulleted items is that I highly suspect that those with earnings over $400,000 that will be paying additional SS tax will not be getting any additional benefit as a result of the higher taxes that they pay.... so the net impact is nothing more than an increasing taxes on people earning more than $400,000. I would object to that as a matter of equity... not because it would impact me or any family members in any way.

The entire reason that the cap exists is because there is a cap on SS benefits so there is a commensurate cap to the earnings subject to tax to be equitable and the proposed bill destroys that equity designed into the current structure.

Regarding the benefits in the bill, you are 87% correct. See Section 202. There is a new band above the 15% band that uses a benefit rate of 2%.

I won't comment on "equity" and "entire reason" because I'm guessing that's beyond the scope of the discussion here.

 

[Independent]

Less somersaulting may be better than more, but it's not as good as none.
Seriously, what would be the downside to a tax code with ZERO complications, such that your 1040 would fit on an index card? Why is it that every bill has to include these gymnastics? Sigh...

I agree with you regarding zero complications. I think exchanging ideas on that would have to be a different thread.

I will note that I file a paper 1040. This year's form fit on the top half of an 8.5 x 11 sheet (both sides). Since I have simple taxes, I didn't have to attach any schedules. (But, I did have to do a side calculation to get the taxable portion of my SS benefit.)

 

[target2019]

I just got a raging headache.

Take two and call me in the morning?

 

[Koolau]

I suppose the sooner we "save" SS (again), the better. I hope we have the will to do it. My kids will need the money. I guess we'll see. YMMV

 

[HFWR]

I would object to that as a matter of equity...

Though I sympa-/empathize, the talking head b-b-b-b-billionaires on CNBC seem to agree with the premise, as several are on record as saying they don't need SS. (Imagine that...)

In general, tilting SS in favor of lower earners makes sense to me.