A solution to keep Social Security solvent

[BrianL306623]

We recently received an email from AARP requesting us to email Congress for the continued funding of Social Security. While this is a worthwhile endeavor, it does not provide a solution and who knows how many folks will actually send the message. So, I am advocating for AARP to be more proactive in how they and their members reach out to Congress. AARP should have some political clout and therefore should use it to our advantage. The unions would be another avenue to pursue!

There is a report authored by the Congressional Research Service titled, “Social Security: Raising or Eliminating the Taxable Earnings Base”. This report (https://crsreports.congress.gov/product/pdf/rl/rl32896) was updated on December 22, 2021. The conclusion of this report is as follows:

“Raising or eliminating the cap on wages that are subject to taxes could reduce the long-range deficit in the Social Security trust funds. For example, the Social Security Administration's Office of the Chief Actuary (OCACT) estimates that phasing in an increase in the taxable maximum (for both contributions and benefits bases) to cover 90% of covered earnings over the next decade would eliminate nearly 20% of the long-range shortfall in Social Security. OCACT's estimates also show that if all earnings were subject to the payroll tax, but the current-law base was retained for benefit calculations, the Social Security trust funds would remain solvent for about 35 years. However, having different bases for contributions and benefits would weaken the traditional link between the taxes workers pay into the system and the benefits they receive.”

In 2022, the maximum Social Security tax - formally called the contribution and benefit base, and commonly referred to as the taxable earnings base or the taxable maximum - was $147,000. It is currently $168,600 and going to $176,100 in 2025. Since 2009, the annual salary for Congressional members is $174,000 and for the Speaker of the House: $223,500, the Majority Leader: $193,400, and the Minority Leader: $193,400. This means even Congress has not been paying their fair share into Social Security.

I am but one person and AARP is millions of people. Will everyone please get this word out?

[BrianL306623]

@GailL1  I subjected all the wages to payroll taxes. The other option was taxing all wages above $400K and that option would pay out benefits equal to 2% of the newly-taxed income instead of the 15% rate that applies to earnings just below the taxable maximum. So, I gave the higher earners a break! 😉

[BrianL306623]

@GailL1 thank you, I will check this out.

[GailL1]

@BrianL306623 @Tonster521 @RickS467730 @sktn77a @MichaelM873962 

THIS IS A 2019 PROPOSAL FROM REP. JOHN LARSON - it is the only proposal that would fix Social Security for the long term - Of course, it did not pass - why because people wanted more expansion or they wanted to fix something they thought was a problem.  He has reintroduced this same proposal title over the years. with each giving more benefits but not getting enough in revenues to close the solvency problem.  

So years ago (2019), I took one of Rep. John Larsons’ SS proposals and broke it all down, explaining the changes and asked what people thought about it - not much response, at least not from very many people.

I am gonna post the link to them here - it was a two part post.   

It seems to me that most people don’t want yo know what’s in a particular proposal - all they want to know is how much will they get with any expansion or a certainty that they will not have to pay anymore.  It is as simple as that.  So as long as the proposal taxes somebody else and as long as the proposal gives them something they don’t have now - IT IS A WIN - right?

PART I of II - The Social Security 2100 Act Analysis 02/02/2019 - AARP Social Security Community Dis... 

PART II of II - The Social Security 2100 Act Analysis 02/04/2019 - AARP Social Security Community Di... 

Now the above is the 2019 version.  If you want to read the latest, well the last one that the SS Actuary analyzed to see how it has changed thru the years - Here it is. 

Social Security 2100 Act Proposal introduced 07/12/2023 Rep. John Larson 

This proposal is still around although it has been changed several times in the years since.  So it doesn’t look to much like the one that I analyzed in 2019.  But he keeps trying - adding more expansion and getting as much as possible from raising the tax max cap.   Hasn’t helped - I count he has done a total of 3 - 4 of these Social Security 2100 Act Proposals thru the years.  Want something that isn’t there - give him a shout and he can probably squeeze it into the next one. [sarcasm]

[BrianL306623]

@GailL1 @Tonster521 @MichaelM873962 @RickS467730 @sktn77a

Gail, thank you for the exhaustive & informative analysis of Rep Larson's proposal. I cannot truly say I understand all of it, yet still trying. I wonder why the $400,000 would start a new %, why not everything above the cap? I understand the 'Board' you are on now.

I think @Tonster521 has it right that in spite of what lead sponsors of the bill in the House said, "The time to put an end to this theft is now," the Act is BS and the theft will be under those who do not have the government pension. AND the Act does not even provide for an expansion of the cap. 😞

[GailL1]

@BrianL306623 wrote

I wonder why the $400,000 would start a new %, why not everything above the cap?

When President Biden took over in 2021, he vowed not to raise taxes on anybody making less than $400,000.  

Before that time, the figures to raise the cap above a (certain) level were all over the place  - $ 200,000, $ 250,000, $ 400,000 -

Simply this is a figure that can be easily used to bring in more or less income so they tweaked it to the $$ needs in the rest of their proposal.  

In all of the proposals, they also keep the current method of raising the cap  annually if we get a COLA (inflation). and thus at some time down the road, the two cap would then join and ALL employee W2 eor self-employed earnings would be taxes.

But the cap raising  is only (1) part of the equation - the cap relates to the top benefit calculated.  Raise the cap, raise the benefit - then the math doesn’t do what they want, that is bring in revenues - so the plan also has to include a method to recalculate any benefit or just eliminate any benefit altogether.

You all are making this way too hard - The program of Social Security is based in law and because the way the law is written there are only a few ways to raise revenues unless the law is also changed to tax other income sources.  ‘

So if you want to change Social Security there are just a few basics that one needs to decide on -

1.  should the Social Security Program be changed to only fix the solvency problem

             OR

should it be expanded or expanded and fix some of the things to which people feel they have been cheated (like the WEP/GPO) {LOL]. IOW, do it all in one big swift law revision.

2.  Where should the added income come from ?  There is only a few placed - (A). contribution increases on everybody who is vested into the program by work earnings (B) raise the cap AND determine how these extra contributions by the higher earners will be figure into benefits OR NOT give any benefit for them  (C) expand the income sources of contribution taxation. (D). more taxes or benefits or NOT (E) increase the federal government interest paid on the special treasuries where any money left after paying benefits is kept

So you figure out which IF ANY expansion of benefits and then the revenue sources.  

But with so many people, there is never agreement on which of these to do.  Somebody is always gonna feel slighted because they think they deserve more of a fair share.

•  It is a political hot potato, politicians can lose their jobs.
• It is a heart string pulling social hot potato,- the needy, the inequality
• it is a mathematical and social hot potato that will affect things like employment and our economy. 

[BrianL306623]

@GailL1 @Tonster521 @RickS467730 @sktn77a @MichaelM873962 

Gail, you have eloquently presented the issues, the feelings, the partisanship, etc. Yet, the real issue is to get SS to be solvent for the next 75 years at least.  There is no way that everyone will be pleased, they never are, and you brought up reasons why they are not pleased. However, what I do not get is that this is an issue that affects every working American citizen that pays into this system that was enacted to provide "old-age benefits for workers, benefits for victims of industrial accidents, unemployment insurance, and aid for dependent mothers and children, persons who are blind, and persons with disabilities." So, we have riots & protests for social inequality, racial inequality, gender inequality, police brutality, antisemitism, etc. oh the list goes on. Yet, why don't we have a concerted effort to push Congress into fixing this issue? Rhetorical question? Not sure! As @GailL1 has pointed out, there have been numerous 'solution' that never see the President's desk. AS @Tonster521 pointed out the aptly named "The Social Security Unfairness Act" is just that, does not take care of the solvency issue and provides benefits for those who, well @Tonster521 summarized it quite well. 

So, the question is, how do we bring this issue to the forefront so American citizens will act? I believe the media is one way, yet we would need all the media to be singing the same tune. Ha! I am trying to connect with Reshma Mehta, Vice President, Campaigns, AARP because this is a campaign they should be fully behind and not just ask their paying members to write Congress. I am also pursuing other avenues. Does anyone else have thoughts or ideas? I am still waiting to hear back from @MichaelM873962  on his EVENTS suggestion.  Thanks all.

[GailL1]

@BrianL306623 wrote

what I do not get is that this is an issue that affects every working American citizen that pays into this system that was enacted to provide "old-age benefits for workers, benefits for victims of industrial accidents, unemployment insurance, and aid for dependent mothers and children, persons who are blind, and persons with disabilities."

===================

Please understand that there is a difference in the Social Security LAW and Social Security THE PROGRAM.  

 The LAW covers a lot of different social welfare programs - meaning for the good of the people - THE PROGRAM of Social Security is the only one that is completely funded by TRUST FUND(S) with specific funding methods.  This is the program that only covers benefits that have been earned by work and contributions (1) OLD AGE RETIREMENT (2) SURVIVORS BENEFITS (3) Social Security DISABILITY 

All the others are funded by General Taz Revenues or from a combination of general tax revenues and payment from another source - like employers for unemployment insurance.

The Supplemental Security Income (SSI) program is also administered by the Social Security Administration but it is completely separate from THE PROGRAM of Social Security.  SSI is completely funded by General Tax revenues and has nothing to do with THE PROGRAM of Social Security except they are both administered by the Social Security Administration.  

That’s another area of confusion - people don’t understand the differences and the government does nothing to correct their misconception in fact they propagate it - for confusion, yes, maybe.  So be leery when people use the acronym of SSI because they think it means Social Security Insurance but it doesn’t - it means Supplemental Security Income - 

SO when you or others talk about fixing Social Security, it will help if you used the term THE PROGRAM of SOCIAL SECURITY or the TRUST FUND Program of SOCIAL SECURITY.  

This is especially true of the disability program because BOTH programs administered by the Social Security Administration - The TRUST FUND one and the GENERAL REVENUES one  are both disability programs - one is an earned benefit and the other is a welfare program for those who haven’t earned the benefit or have a limited amount of earned benefits.

If you just want the Trust Funds fixed for solvency (and I say, TrustS Funds - plural, because they are broken down onto (2) parts - One is for the Social Security programs of OLD AGE RETIREMENT and SURVIVORS BENEFITS and the other is for SOCIAL SECURITY DISABILITY.    Contributions are also broken down to the (2) Trust Funds too, then we need to fix the solvency of THE PROGRAM of Social Security - the earned benefits of OLD AGE RETIREMENT, SURVIVORS BENEFITS and SOCIAL SECURITY DISABILITY. We need to increase the TRUST FUND BALANCES by increasing the revenues for any covered benefits - the benefits that are now covered + any of the ones that might be added or are planned to be added.

ADDING to the TRUST FUNDS revenues isn’t hard at all - The hard part is selling it to the American People because that’s where the unintended consequences will come into play.  They only want the increase in revenues coming from a place that does NOT affect them, meaning paying in more by some means.

It seems to me that the big sale to the American people of any proposal has to be how they see the fairness of it - nobody wants to pay more. 

So how do you convince the American people that to fix the system for the long term that everybody is gonna have to do some part in fixing it?  How do you convince them that not just taxing the “rich” is gonna fix it when most believe that it will and that’s all that needs to be done.  

The solvency methods has to be sold to them.  

When President Reagan and Tip ONeill came up with their compromises in the 1980’s to save THE Program of Social Security, they sold it as saving the system and it did but many of their proposals were for long term inclusion - like raising the retirement age - we are only now reaching that age 67 full retirement age and it was proposed and began the trek to in the 1980’s.

So I believe that anything that we do will have to be done in incremental steps whether that is increasing tor eliminating the cap, raising the retirement age with still an early retirement option or raising the contribution rate - all done incrementally for the next 30 or more years.  OR ALL OF THE ABOVE ⤴️

But IF WE don’t start things like this SOON - we lose the incremental change options.  Then it becomes emergency action.  NOT GOOD

With incremental change, we give the people a chance to adjust.  Just like the year after year Trustee REport says:

“Lawmakers have many options for changes that would reduce or eliminate the long-term financing shortfalls. Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.”

2024 Social Security Trustee REport Summary 

I really have no fight in this game, so to speak, I am closer to death age now than I am to my full retirement age.  I planned well and have a pretty good retirement income with several assets and resources.  I pay a good amount of taxes on my Social Security Benefits every year, I pay Income Related Monthly Adjusted Amount (IRMAA) Medicare Part B premium surcharges every month on my Medicare benefits.

Kiplinger.com IRMAA 2025 rates by income 

I was really ticked off when the 1980’s changes were made cause it did affect me & husband, both self-employed.  But we adjusted and after time, the upset emotion faded.

But what do you want to bet that in this day and the political strife among politicians and people - that nothing gets done or if it does, massive rebellion.  Seeing a bunch of old people and disabled people protesting in the street is something don’t want to see.

And who knows - the Millenials and those younger might not even want this Social Security Program system - they may want something else. 

So MY plan is to prepare for what is right in front of us now - come around 2035 or so - benefits will be cut about 20% +/- so I am preparing my finance structure for it.  

Good Luck 

[BrianL306623]

@GailL1 Thanks. I believe the millennials will need the luck more than we do. I am glad to hear you are secure and wish you the best. Thank you for all your insights.

[RickS467730]

I completely agree that while AARP encourages us to email Congress, they rarely offer concrete solutions themselves. Everyone recognizes the urgent need for a viable solution to the challenges facing Social Security. However, the key question remains: what exactly should we propose to Congress?

In my view, raising taxes is not the answer. Doing so would only reduce the take-home pay of hardworking individuals, placing an even greater burden on them. Instead, I believe the best path forward is to consider a model similar to the reforms implemented in Sweden during the 1990s.

We should move toward a partial privatization of Social Security—not an all-or-nothing approach, but a balanced strategy. Privatizing a portion, such as half of the program, could introduce greater flexibility and potential growth for individual accounts while maintaining the security and stability of the traditional system for those who depend on it most.

Partial privatization, like Sweden’s model, could give individuals more control over their retirement savings and potentially provide higher returns compared to the current system. It would also allow for diversification, which could improve the program's long-term sustainability. At the same time, retaining a public portion ensures a safety net for those who might struggle with the inherent risks of market investments.

That said, implementing such a plan would require careful consideration of several factors, including transition costs, potential market risks, and ensuring fairness across all income groups. To address concerns about investment risks, individuals could have the flexibility to choose their own level of risk, tailoring their investments to align with their financial goals and risk tolerance. It would also be essential to clarify the government’s role in managing this system and address public concerns about shifting more responsibility to individuals.

[RaymondO668575]

You wrote, "In my view, raising taxes is not the answer."

It is not about raising taxes, it is about not giving the ultra-rich a tax cut. They should pay their fair share of taxes just like everyone else.

I'm sure most of them have a tax-loop hole up their sleeve anyway.  Speaking of which

reinvestment in the corporation is one good loop-hole that is a win/win for us all.

[MichaelM873962]

How can we get AARP members, union members and other americans working together to address this issue? I'm willing to help if we form a group on https://www.meetup.com/home/?suggested=true&source=EVENTS and establish one shared plan to fix social security. I feel the new republican administration will try and cancel the program or move the funds to a market plan like 401K's.

[RaymondO668575]

Hello Michael, I've formed a letter writing campaign to House Reps and Senators and

we will be including this issue of soclal security and Medicare. This is with Move ON,

want to join us? CLICK HERE

We need to do research, that is a high priority. To get updates from Congress and the Senate to not only see when these issues get on their agenda but also to see who how champions and opposition is.

-RKO

[BrianL306623]

I hardly think that a biased & partisan group is the answer to the Social Security issue. I say this because what I copied/pasted from its webpage below. We need bipartisan support from both houses of Congress and what we really need is to get the media, both sides, hammering this to the people and to Congress. Oh, for Martin Luther King Jr. to gather another march on Washington, this time for the sake of Social Security solvency! The passing of the latest bill is NOT helping and shows that Congress does not care and will wait until the last minute for something that will only pass because of all the pork and earmarks attached to it. 😞

In 2024, MoveOn aims to endorse, campaign for, and elect progressive Democrats nationwide to advance a progressive agenda.

We cannot allow Republican MAGA extremists to continue to threaten our freedoms. From combatting book bans to abortion bans, we’re committed to maintaining and expanding our majorities in the White House, Senate, and House of Representatives.

[GailL1]

There isn’t ONE shared plan -

SSA.gov - Proposals To Change Social Security  

The problem has been going on now for OVER (10 ) years.  We have had proposals, we have had various commissions to develop the perfect plan to fix it - but we have managed to only fix a very few things, 

You don’t have to worry about any complete changes to the system we have now for at least current to soon to be retirees.  It is baked into law and would take a major overtaking to change it and then everybody would have to be onboard cause it has to also pass Congress.

Now maybe we could set up a completely different program for perhaps those about 30 years old or younger - since we seem to be proving that this old way doesn’t work so well financially since we haven’t figured out how to tax some machine doing the work of 10 people to fund the program.

Do you even think that within the AARP umbrella, we could all agree on what to do?  

[sktn77a]

"cause it has to also pass Congress"

Unfortunately, that doesn't reassure me at all, given the clowns/crooks that were just elected for the next 4 years!

[GailL1]

Agreement and Government (i.e. Congress)  is an oxymoron - that the kind of changes that would require 2/3 and neither Party has that for a least the next two(2) years.  

Just prepare accordingly for a benefit reduction come about 2035 - give or take a year or two 

[BrianL306623]

Okay Gail, you have provided some good insight into the issue and the problems. However, maybe because of your experience, you are biased as to whether A solution is even possible or that WE can bring the parties together to present/approve a workable solution. So, I am going to ask you straight up - do you have any idea as to what WE can do or are you just resigned to wait?

[MichaelM873962]

Thank you for the detailed response. I would very much like to try and come up with an agreed to solution that the majority would agree to. How about this:

1. Let's create/copy brief summaries of the known solutions

2. We post the solution summaries on the various communication portals.

 3. Use simple thumbs up or down voting to identify the most popular plan

 4. Use mass emailing and calls to supportive politicians

Thoughts?

[Tonster521]

@GailL1 @BrianL306623 I am trying to reply to both of you as well as other readers of this interesting topic. It is clear to me that both of you have researched this topic and provided us with you thoughts. I wish more would offer their thoughts. Who knows, there may be some other ideas and/or concepts that may be solutions. More importantly, we need to contact our Representatives directly. I have done this on many occasions (mostly with Medicare issues) and have had positive outcomes. I attend all seminars that my Representative hosts. Although you may not get a chance to talk directly to the Representative because of the number of attendees, you can discuss issues with their staff which is productive. 

At any rate, income inequality has been an issue for many years. Instead of closing the difference (especially by increasing minimum wages) it appears to be increasing. I am providing a link to an article dated March 13, 2024 from the Tax Foundation https://taxfoundation.org/data/all/federal/latest-federal-income-tax-data-2024/ It is statistical data that may be cumbersome for some. At the least, take a look at Table 1 which provides a Summary of Federal Income Tax Data, TaxYear 2021. The Table informs us that for tax year 2021, the top 10% of tax returns or 15,358,991 reported $7.7 Trillion of income which represents 52.6% of the Adjusted Gross Income ($14.7 Trillion) for 2021. WOW! Most folks do not know this statistic.So, would increasing FICA taxes for this group of about 15 million with about 52% of the Country's AGI place a financial burden on them? Obviously, no. It would be interesting to know the breakdown of the AGI (i.e., how much is payroll, Chapter S distributions, dividends, capital gains, interest, etc.). This is a huge source of revenue for the SS Program whether taxed directly as FICA or taxed as Federal Income Taxes (FIT). The FIT approach can be similar to how SS Benefits are taxed, then transferred to the SS Trust and/or Medicare Hospital Trust. This is like moving money from your right pocket to your left pocket.

It appears to me that FICA proposals/solutions have been focused on the bottom 75% or about 115,192,431 who reported only about $4.1 Trillion ($4,108,645,000,000) of AGI in 2021. There is an interesting article from the National Bureau of Economic Research (NBER) from February 2000 that questions do the high income folks subsidize the low income folks.   chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.nber.org/system/files/working_papers/w7520/w7520.pdf I hope I copied and pasted the article correctly. It is statistical and informative. The final result boils  down to whether you use a 2% or 4% discount rate. At 4%, the findings are that the low income folks are subsidizing the high income folks. So, maybe the high income folks can level the field by paying their fair share of FICA. Another question that should have been addressed years ago is the 90% first bend point in the PIA formula for high income folks. As we know, the 90% bend point was created to keep folks above the poverty level. High income folks do not need the 90% bend point calculation. Perhaps that bend point can be developed at the 32% bend point instead of 90% based on some level of income whether taxed or not (i.e., muni nonds, etc.)  

[GailL1]

@BrianL306623 @Tonster521 

Take the simpler way out and just make it another need-based  program with the benefits formula having such bend points as to allow for MORE benefits to be given to those who have had the least amount of earnings during their working years. 

OH, right it is already this way - but we can make it even more so - and just cut out any benefits for those having made some high average earnings during their career.  

Then we could just fall all over ourselves to earn less and less instead of more and more during our lifetime of earnings.

I have always heard that Social Security was to keep one out of the clutches of poverty in their old age.  But that’s not exactly right - it is there to keep one out of the clutches of poverty in their old age WHEN COMBINED WITH OTHER RETIREMENT SAVINGS.  

How can one expect to stay out of the poverty level when their lifetime of earnings didn’t get higher to build a better benefit especially when for a vast majority of beneficiaries have NO other retirement savings - they are living completely off of the old age benefit of Social Security - yet they complain that it is not enought to support them - thinking that is the way it is suppose to be.

Personally, I think maybe we should let them pick their benefit amount and if that is higher than what they are earning then maybe they should have to make up the difference in their contributions and their match themselves to assure themselves of what they want to get from it.

Since I am very old, I won’t be drawing my benefit for that many more years but neither will I have to continue to make contributions to the program either via taxes on benefits.  Unless we devise some way for my estate to pay back the program in some way.  

Why do we constantly want to punish the responsible and reward those who have had a lifetime to plan yet they don’t and I hear tell that they just can’t.  What they gave was as good as it got for years - 

Bread use to be a nickel a loaf now it is $ 5.00 a loaf - so I see no other way than upping the benefit astronomically to give them that pie in the sky - and take from the others to whom we as a socially have deemed they don’t need it.  

Now isn’t that some other form of government?  

[BrianL306623]

@GailL1 @Tonster521 @MichaelM873962 A lot of folks have reviewed this thread yet, you are the only 3 responding.  I am not a community organizer so I do not know what the next steps should/could be. Michael has made some proposals, yet I am not sure we would get better results with a mass emailing or portals. And for Congress, I am glad to hear that Tonster has had luck because I have not - just the standard thank you for your reply letter! We need someone with a true in. Anyone know Elon?

It appears to me that Gail & Tonestar have way more knowledge on this subject than I. There may not be a perfect solution out of the gate, yet, Tonestar's latest reply was quite the insight and maybe we start with the low lying fruit and go from there. Yet, we still have the issue of to whom to we send any proposal.

Thank you all for your insights and contributions and let's see where we can take this.

[Tonster521]

@BrianL306623 I think the lack of replies may be due to folks not completely understanding the SS Program specifically how benefits are developed and funded. Some do not understand the Primary Insurance Amount (PIA) formula or the relationship (if any) between contributions (FICA taxes) and career earnings (only 35 years) or actuarial assumptions/calculations. It is complicated. In the past, some believed that SS Benefits are a guaranteed paycheck from the Government that will never diminish or be reduced. With all the news about the SS Trust being depleted by 2034 or 2035, I am amazed that folks are not demanding results from their Representatives. Moreover, folks are reelecting them again and again. I worked in the private sector for 46 years; and, if I  performed like that, I would have been terminated or fired. At any rate, Gail1 has pointed out in an earlier reply that proposals have been out there for about 10 years. It is abundantly clear that revenue needs to be increased and politicians have avoided tax increases which is the proverbial "third rail". FYI, I am linking an article from 2020 that addresses Biden's  proposals for the SS Program. https://taxpolicycenter.org/taxvox/close-look-joe-bidens-social-security-proposals Even though the proposals would not solve the entire shortfall on the SS Program, they would have been a move in the right direction. As we know, nothing happened. I believe showing up at your Representatives' office, seminars, town hall meetings, etc. has more value than hundreds of form letters.

[MichaelM873962]

 I think I am going to go with Robert Reich recommendation on how addressing social security https://www.youtube.com/watch?v=RS0uKE3sRVY

a. Raise the cap on income subject to social security taxes. This would impact upper income people of which I am one.

 b. Allow young legal immigrants to enter the country so they can pay into the system as the current population gets older.

 Fixing Medicare: Allow the government to negotiate prices on all drugs not just a    limited few.

[GailL1]

@MichaelM873962 wrote

You do know the reason that the cap is there in the 1st place - right?  It directly correlates to to the maximum benefit paid out.

a. Raise the cap on income subject to social security taxes. This would impact upper income people of which I am one.

Raising the cap without giving a benefit changes the scope of the program - if you just want another social welfare program - then do that.  In the beginning, the proposals being made to raise the cap were offset by adding another bend point to the benefits formula.  That sounded fine and dandy UNTIL it didn’t bring in as much income as was needed to not only FIX but to also EXPAND so now, proposals being submitted just completely eliminate any benefit at all to those paying in more because of the tax max increase.

 b. Allow young legal immigrants to enter the country so they can pay into the system as the current population gets older.

We already do that.  But it is only fair if they are legal and ONLY IF THE country they are from has a Totalization Agreement with us - so that they earn a benefit.  Otherwise it is just a different take on slave labor.

SSA.gov- International Agreements  

 Fixing Medicare: Allow the government to negotiate prices on all drugs not just a    limited few.

Already done - I gave you the link to the CMS.gov site on the drug negotiations process put into play by Biden’s Inflation Reduction Act.. 

They really got the price down on these (10) meds - yea, right ?!? [sarcasm]

If we are gonna negotiate we need to do it from a standpoint of power - meaning that if we don’t get our way - we walk away.  Until such a later time, when the drug price has already modified by competition and we can then negotiate a better price.  But forget about getting the latest and greatest immediately.

[BrianL306623]

@GailL1 @Tonster521 @MichaelM873962 Gail - please go easy. It is bad enough that Congress cannot get it together, we do not have to have what I am perceiving as acrimony in your responses. Yes, this is a touchy subject, yet I think we are trying to work through a way to get something done, no matter how monumental it is. I'm a middle child of 5 so I have had the peacemaker role all my life. 😉 If Michael is willing to take a stab at something, let's assist him not deter him. In the meantime, we still need to find an avenue and we will have to wait until the new Congress is in session. Gail, I am not trying to offend you, we should be trying to work together.

[GailL1]

@BrianL306623 

I have been on this Board since 2008, thus my acrimony comes from the point of explaining and giving links to information on this subject for nearly the whole time.  

I don’t take offense - but I am tired.  Years ago, I did an analysis here of John Larson’s Social Security 2100 Act.  I thought it had promise but it wasn’t enough for those who wanted an expansion so he had to go back to the drawing board.  

So perhaps the 1st thing to agree upon is:  DO WE WANT TO FIX THE SOCIAL SECURITY TRUST FUND or DO WANT TO EXPAND IT AND INCLUDE THOSE EXPANSIONS IN THE FIX?  

And of course, everybody wants something added in the expansion.  

If WE (meaning the citizens of the USA) had wanted to preserve the programs of the Social Security System, we would have long ago taken some steps to fix it, just like Reagan, O’Neill, Dole did it in the 1980 when it was very close to insolvency.

• incrementally increased the rate of contributions for everybody thru the years 
• forced ALL cities and state governments to bring their employees into the Social Security system.
• made sure that the self-employed knew their liability in paying into the system and thus checked their tax returns every year for these added Schedules and payments - mainly by having 1099 Income reporting forms submitted with tax forms, like W2’s
• Discourage under the table payment for services by employers by extremely punitive fines and levies. 
• by taxing for SS & Medicare employer to employee benefits like health insurance which is used to thwart an increase in wages.   Right now, Employer payments for employee health insurance are not considered wages and are not subject to Social Security, Medicare, and FUTA taxes, or federal income tax withholding.
  Seems as though people focus on the tax max cap - sometimes without knowing why it is there - and don’t see anything else.  

  EVERY year since about 2010, we have been warned of the consequences 

  2010 Trustee Report Summary 

  The ACA makes significant progress toward making Medicare financially viable. But while it is projected that the Medicare HI Trust Fund is adequately financed until 2029, and the Social Security OASI and DI Trust Funds are adequately financed until 2040 and 2018, respectively, the significant longer term financial imbalances of the programs still need to be addressed. The sooner action is taken to address the long-run financial imbalances, the more reform options will be available, and the more time there will be to phase in changes so that those affected will have adequate time to prepare.

  2024 Trustee Report Summary

  Lawmakers have many options for changes that would reduce or eliminate the long-term financing shortfalls. Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.

  Currently the dates are:(2024 report)

  Social Security:  If the OASI Trust Fund and the DI Trust Fund projections are combined, the resulting projected fund (designated OASDI) would be able to pay 100 percent of total scheduled benefits until 2035,. . . . .At that time, the projected fund's reserves will become depleted and continuing total fund income will be sufficient to pay 83 percent of scheduled benefits.

  OR without combining the Trust Funds:  The Old-Age and Survivors Insurance (OASI) Trust Fund will be able to pay 100 percent of total scheduled benefits until 2033, unchanged from last year's report. At that time, the fund's reserves will become depleted and continuing program income will be sufficient to pay 79 percent of scheduled benefits.

  Medicare:  

  • The Hospital Insurance (HI) Trust Fund * will be able to pay 100 percent of total scheduled benefits until 2036, 5 years later than reported last year. At that point, that fund's reserves will become depleted and continuing program income will be sufficient to pay 89 percent of total scheduled benefits.

  • The Supplemental Medical Insurance (SMI) Trust Fund **is adequately financed into the indefinite future because, unlike the other trust funds, its main financing sources--enrolled beneficiary premiums and the assocoated federal contributions from the Treasury--are automatically adjusted each year to cover costs for the upcoming year. Although the financing is assured, the rapidly rising SMI costs have been placing steadily increasing demands on beneficiaries and general taxpayers.

  * HI Trust Fund = Part A - where the payroll taxes go

  ** SMI Trust Fund = Part B & Part D

[Tonster521]

@GailL1 Over the years, I have read many of your posts and replies regarding Social Security and Medicare. I have always found them to be an outstanding source of information including the links you provided. Most folks probably do not realize the time and effort it takes to research the information you provide. Moreover, explaining SS Benefits and Medicare Benefits in the space that AARP provides on this forum is an art. These are complex social benefit programs that many consider to be retirement programs similar to pension plans and retiree medical coverage which, as you know, there are not. If you use the Employee Retirement Income Security Act (ERISA) which became law in September 1974 (50 years ago) as the source for defining a "benefit", SS Benefits would be closer to a welfare benefits than a pension benefit. Medicare is definitely a welfare benefit. Many folks still consider the FICA taxes they pay based on their Earnings as contributions to a retirement plan such as an IRA or 401 K. 

At any rate, you provided an excellent link to Proposals for Social Security in your reply dated November 11, 2024. I have reviewed a number of the proposals including the corresponding Actuary analysis which is cumbersome but nonetheless needed in order to understand each proposals chance for success. I believe John Larson and Bernie Sanders approach are doable and will accomplish the necessary funding. It is abundantly clear that revenue needs to be increased and the solution is to tax all earnings including the tax protected Chapter S distributions. I realize the high income folks will pay more and they will have to accept that reality just like the Medicare tax on almost all income. In an earlier reply, I provided a link to the income inequality that exits based on 2021 data. It is probably worse for 2024. For 2021, the bottom 50% of taxpayers or 76.8 million folks have taxable income less than $47,000/year. Raising FICA taxes on this group will not be a viable solution. Taxing the folks that have the income which is currently not taxed will provide a solution. I know that that those folks will complain, but not one of them will quit their job over paying some minimal additional FICA taxes. Although you have mentioned that this may be a punishment, it is only 6.2 cents on a dollar of income. 

As voters, we need to replace the Senators and Reps. that refuse to provide a solution regardless of their Party affiliations. I believe we do not need to reinvent the wheel with another solutions, but we need to replace the folks that do not do the job they were elect to do.

[GailL1]

@Tonster521 

I know that you know how benefits are figured and how it relates to what a person’s has made working - the highest of 35 years.

If they have worked for 30 - 35 years on a low wage, what do they expect they are going to get from their Social Security benefit.

Somebody in this thread said that they didn’t think that the contribution % should be changed because people would be taking home less in money that they needed to live on -  Well, there you have it - they want MORE in benefits but don’t want to pay in more while working.  They have no idea how the benefits are figured. The benefits formula is already progressive in nature, with benefits replacing earnings at an increased rate for those low income earners than for others.  

We seem to be in the mode of the “rich” paying more and that’s all the majority of people see.  What I see are people wanting MORE but don’t want to pay any MORE.  

Congress-critters will introduce a bill to fix the Social Security System and then it gets tweaked to get more money in or to expand some types of benefits which is money going out.  If the later, they have to get more money in.

Look at the Larson’s last Social Security 2100 Act. It only solves some of the shortfall -  He expands some benefits and raises the cap - but then the bill calls for the pull back of some of the expansion benefits but it continues the cap raising forever.  

Do you really think that a pull back of an expanded benefit would ever work?  Talk about a mutiny; riots in the street.  

Same thing with the Sanders proposal - when 1st introduced years ago, it was proposed to raise the tax cap for those making over $ 250,000.  But then President Biden’s had made a promise not to raise any taxes on those making less than $ 400,000 - so Sanders goes back to the drawing board with his proposal of course then raising the tax max to those making over $ 400,000 and of course he had to raise it higher to cover what the proposal lost from Biden’s promise.

WE DON’T GOVERN BY MATH WE GOVERN BY HEART STRINGS.  And I fail to see how this teaches people anything about the mathematical portion of the Social Security system.

I hate to be a skeptic but I see no way to get anything corrected when we are in this mode of thinking.  I believe that the creators of the program thought that it would be carried on as it was designed.  Maybe they thought that people would be smarter and higher earners after a while but that hasn’t happened - Maybe they thought that people would save for their own retirement and Social Security would only be an auxiliary benefit - that hasn’t happened either.

We can take apart some of those proposals but unless there is a heartstring component, vote buying initiative or something else, nothing will get done - well, unless you are a government employee who wants to end the justification of the WEP or GPO - but I guess that is a heart string occurrence.  

No, nobody will quit their job over having to pay additional Social Security taxes.  But they (employer and affected employees) will figure out some way to cut their losses.  Just like the Social Security Actuary says when evaluating the Larson last plan:

” . . . . in response to the increase of payroll tax in Sect. 201 for 2025 & later, we assume employers will redistribute total employee compensation along taxes, wages and other compensation.  This behavioral response reduces the increase in both payroll tax revenues and scheduled benefits that would accrue in absence of this behavioral response.”

SSA,gov Actuary Analysis of Larson Proposal 07/12/2023 - Social Security 2100 Act proposal -  

[Tonster521]

@GailL1 I thought it will be helpful to include a link to the  Legislative History for Social Security.https://www.ssa.gov/history/reports/crsleghist2.html#:~:text=In%20addition%2C%20the%20amendments%20i.... I hope I copied and pasted it correctly. You may be aware of that history which is only through 2000, but other readers may not be aware. My reason for this history is to inform the readers that, in the past, Congress seemed to be more focused on addressing SS issues rather than our recent Congresses that seem to be not focused, partisan, and perhaps adversarial. Another point that many folks are not aware is that the SS Program was created in 1935 to help lift folks out of poverty. The Great Depression caused many hardships. It was devastating for the elderly who could no longer work. They needed to depend on their children or would apply for Relief from their State and accept the negative stigma that came with the State Relief Programs. In a few words, the SS Program was a potential solution. Funded with a dedicated tax, FICA, the SS Program would not need to rely on annual funding from the General Fund subject to a budget approved by Congress. It was modeled after the Program that was in place in Germany for many years.

Even from its early years, there has been no correlation between the FICA taxes paid and the SS Benefits received (including Spousal and Survivor Benefits, if any). It has been said that most folks receive from the SS Program the FICA taxes they paid during their career within less than 10 years. It could be less than 7 years if Spousal Benefits are paid in addition to Retirement (Old Age) Benefits. Moreover, SS Benefits will continue to be paid even after one receives all of the FICA taxes they paid. This is a very good deal and will last forever as long as the SS Program has more FICA tax revenue incoming than SS Benefits paid outgoing. As you know, that is no longer the case. There are a number of "front burner" factors that are "mission critical" for the SS Program to continue without depleting the SS Trust and reducing SS Benefits approx. 20% in 2034 or so. This will send many folks below the poverty level especially if SS Benefits are their  only source of income. I have seen estimates as high as 30% to 40%. Many of these folks are widows. 

With regard to addressing the SS Program's Benefits as progressive, one must also address the FICA taxes as regressive. Many confuse the progressive formula (PIA) with paying lower income folks more SS benefits. It should be noted that all folks whether low, medium, high, or maximum earnings are governed by the same PIA formula. That means in 2024, everyone including the maximum earning folks (and folks earning substantially more than maximum) receive 90% of their first $1,174 of Average Indexed Monthly Earnings (AIME). The argument the higher income folks make is that the lower income folks have a higher income replacement ratio because earnings from $1,174 to $7,078 are only replaced at 32% and earnings from $7,078 to the maximum are only replaced at 15%. Even though the higher income folks receive greater benefits which is the true meaning of a progressive formula. I am providing a link to a chart that illustrates a higher AIME always results in greater SS Benefits. https://www.cbpp.org/charts/social-security-benefits-are-progressive-6 I hope the copy and paste worked inasmuch as the chart was obtained by clicking on another link (drilling down) in a 10 Facts About Social Security article. It should also be noted that once higher income folks exceed maximum earnings, their FICA tax rate reduces to zero (0%). This is regressive taxation. The greater your income, the less FICA tax one pays. Compare the FICA tax rate for $100,000 (.062 or $6,200) with the tax rate for $500,000 (.0124 or $6,200) with the tax rate for $1,000,000 (.0062 or $6,200). The higher income folks (greater than maximum) actually pay less FICA taxes than the lower income folks. This is regressive taxation for progressive benefits. Regressive FICA taxes over time along with a shrinking employment base (Labor Participation Rate is only 62%), it is a formula for depleting the SS Trust. 

If you review the data that I linked in an earlier reply regarding 2021 Federal Income Tax Data, you will find that 15,358,991 taxpayers reported about $7.7 Trillion of AGI which is 52.6% of all taxpayers' AGI (about $14.7 Trillion). I reduced the $7.7 Trillion by maximum FICA taxable income ($168,600 for 2024) since I was unable to find 2024 AGI. I am sure 2024 AGI for that group will be greater. Maximum FICA Earnings for 15,358,991 taxpayers is about $2.6 Trillion. So, approx. $5.1 Trillion of AGI for this group is not FICA taxed. This is about 66% of this group's AGI not taxed and only 34% FICA taxed. Whereas, the bottom 50% of taxpayers have 100% of their AGI FICA taxed. I think and believe placing everyone on a level playing field (FICA tax all AGI) will solve about 70% of the SS shortfall based on my analysis of the actuary's opinion of the proposals. We do not need another proposal. We need Congress to do the job they were elected to do.

[BrianL306623]

@Tonster521 Yes, this is the solution "I think and believe placing everyone on a level playing field (FICA tax all AGI) will solve about 70% of the SS shortfall based on my analysis of the actuary's opinion of the proposals. We do not need another proposal. We need Congress to do the job they were elected to do."

Now, the only way I see to do that is to exert pressure on Congress from all sides, e.g., media, insurance companies, unions, etc. I am looking into options and welcome any thoughts and ideas.  Thank you for your insightful contributions.