However, it is in dire need of updates and changes to ensure its continued solvency. Social Security is the backbone of America’s retirement income as it keeps our seniors out of poverty and allows them to retire with financial security and with dignity. This proposal would also significantly increase the long-range actuarial status of the trust funds to essentially help offset the increases found earlier in Sanders’ proposal. In addition to higher payroll taxes, many individuals would be paying an additional investment tax of 10%.
Bernie Sanders’ proposal would basically triple the current investment tax by adding an additional 6.2% on the lesser of your MAGI above the threshold or total investment income. These levels, unindexed for inflation, are $200,000 for a single filer and $250,000 for a married couple filing jointing. As part of the Affordable Care Act, a new 3.8% tax was added on investment income above certain Modified Adjusted Gross Income levels. Addition Of A 6.2% Tax On Investment Income.Under the proposal you would not earn new benefits on the increased wage taxes. In a recent debate, Sanders challenged Clinton on their Social Security reform differences, stating that “Iwould hope that you (Secretary Hilary Clinton) would come on board and say this is the simple and straightforward thing to do: We're asking the top one and a half percent including passive income to start paying a little bit more so that the elderly and disabled vets in this country can live with security and dignity.” However, one way to essentially wipe out Social Security funding issues is to expand the payroll tax to all earning above $250,000. However, exactly how the taxes will be applied are still being debated. Expanding taxes to cover the Social Security shortfall will likely be a part of any Social Security reform. Expansion Of The OASI Payroll Tax On Earnings Above $250,000.According to the Social Security actuarial report, this change would also increase the long-term deficit of the trust funds but would provide seniors with more accurate inflation protected benefits. As such, the proposal would remove the CPI-W and replace it with a more accurate reflection of inflation by using the Consumer Price Index for the Elderly (“CPI-E”), which has generally been. However, the CPI-W does not reflect these differences. Seniors spend a significantly higher percentage of their income on health care expenditures than does the average worker.
This index is a poor representation of impact of inflation on America’s seniors, as the spending habits of seniors are much different. But currently, the COLAs are determined based on the Consumer Price Index for Urban Wage Earners and Clerical Works (“CPI-W”). The COLAs are crucial to ensure that seniors have inflation protected income. The Social Security Expansion Act proposes a modification to how cost-of-living-adjustments (“COLA”) are currently calculated for Social Security benefits. Modification of Social Security Cost-of-living Adjustments.The Social Security Administration stated the increases in benefits would add a substantial cost to the Trust funds and increase the long-range actuarial deficit. An across the board tax increase that could support higher benefits is another way to force mandatory savings.” However, the increases in benefits do not come without a cost. It’s interesting to consider increasing Social Security benefits as part of the solution as well. According to David Littell, the Co-Director of the Retirement Income Program at The American College in Bryn Mawr, PA, “reducing the retirement income shortfall facing future generations is a serious issue and much of the attention has been on increasing pension coverage to help solve the problem. The $780 increase would equate to roughly a 4.875% increase in benefits for the average S.S. This totals an increase by $780 a year on average, which is a large increase when you consider the average S.S. According to Sanders, the overall changes he proposes would enable Social Security benefit payments to expand by an average of $65 a month, adjusted for inflation. According to Bernie Sanders’ proposal, Social Security should be expanded nearly across the board for all Americans paying into the system.
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