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?

[GailL1]

@BrianL306623 @Tonster521 

wrote 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 let me get this straight - you want to RETAX money that has already been taxed once by FICA taxes?  

My IRA contributions were already taxed by FICA taxes when I earned the amount that I contributed - 

You want to tax the dividends, the capital gains, the rents and other income to which I invested and saved during my working career to make my retirement income complete and diversified.

ALL of these investment amounts were used to create this flow of retirement income and they were taxed by FICA taxes in the year I earned them.

I was self-employed and thus

• I had NO employer who matched my contributions - that was ME.
• I had NO employer that paid any portion of my health insurance - that was ALL on ME
• I had NO employer that contributed any matched amounts to my retirement accounts - that was ALL on ME.

I used my after tax earnings (income and FICA) to buy properties in order to have a cash flow from them to add income then and into my retirement.  That was all ME.

NOW each year, because of my income, I again pay taxes on my Social Security benefits of which the taxes I pay go back into the Trust Funds.

I also pay income taxes on all of my retirement money - some from retirement accounts and some from my investments.  

The two exceptions are:

1.  any ROTH distributions and those are not included in my AGI - in fact not even shown on my tax return because of the promise (law) made for these accounts.

2.  In some years I elect to use my IRA distribution as a QCD (qualified charitable distribution) to save on taxes when my other investments have done extremely well.  At lease those would be a wash in the AGI figure.

There are millions of retirees just like me - we have an AGI even in retirement.

Also of note - Medicare employment taxes have NO tax max annual limits - they are paid on every single penny of EARNED INCOME.  

As always, tax the responsible - LOL.

Just make Social Security a welfare program and give lots to the lowest income earners and then less up to whatever limit you think - but be cautious - what the government giveth, can also be taken away.

I

[Tonster521]

@GailL1 You lost me with your reply regarding being taxed again on money that was already taxed pursuant to FICA. I am not sure that you know taxpayers pay taxes (i.e., federal, state, local, FICA, NIIT) on income whether earned (i.e., wages, salary, self employment, etc.) or unearned (i.e., interest, dividends, capital gains, rents, royalties, income from passive investments, income from pass through entities, etc.). Taxpayers do not pay taxes on the amount of principal (cost basis) that is invested (i.e., stocks, mutual funds, ETFs, bonds, CDs, savings accounts, T Bills, etc.). Many folks are not subject to the 3.8%  unearned income Medicare contribution tax because their AGI or MAGI, if applicable, has not exceeded the current thresholds ($200K/ $250K) established by the ACA in 2013. This tax has been for about 10 years. It should be noted that both John Larson and Bernie Sanders expanded  on this concept in their proposals to fund the SS Trust and avoid depletion in 2034 or so by implementing a 12.4% tax in addition to the 3.8% tax. Ir appears to me that Larson suggested a higher threshold ($400 K for both single/married) and Sanders kept the thresholds at $200 K single/ $250 K married. This may be a contributing factor why the Sanders approach provides a $500 Billion ($.5 Trillion) surplus at the end of the 75 year period and Larson's approach is still in a $1.7 trillion deficit at the end of 75 years.

With regard to your self employment, there are many expenses that you may deduct from your self employed income. If you have another person prepare your taxes, please review Part II of your Schedule 1 to make sure that you received the appropriate deductions for items such as self employed health insurance, self employed taxes (FICA), IRA or self employed SEP or Qualified Plan.  As you know taxes are complicated. FTY, I elected to use AGI because for many folks their AGI and MAGI are the same. They understand AGI because it does not need to be arithmetically calculated and appears on their Form 1040. MAGI generally includes income such as interest from municipal bonds or foreign income which must be added back in to the AGI since it is either not taxed by the federal income tax rules or you receive a deduction for paying foreign taxes.. 

Lastly, take a look at the number of shares of stock that many current and ex- executives own via the stock option scheme that they received in lieu of taxable compensation. Many have over 100 million shares that pay a tax qualified. For example, if the dividend is $1.00 per year, that is $300,000,000 of income that is only taxed 20 % federally and 3.8% NIIT versus 37% per the marginal tax bracket and 3.8% NIIT. That is one heck of a welfare benefit for the higher incomes.

[BrianL306623]

@Tonster521@GailL1  Please help me to understand. If I get a paycheck from my employer, my net pay is less than the gross pay because the FICA and other taxes are taken out. Now, when I file my annual taxes, there is either a standard deduction, or more those with many more deductions to use. So, now we get to the Adjust Gross Income (AGI) and you said to tax FICA on all AGI. So, now doesn't that mean that FICA is taken out twice, e.g., once from the paycheck and then again from the filing? Further, if FICA was to be only taken out of the AGI, wouldn't that still favor the higher earners who may possibly have more deductions that the middle and lower class?

[RickS467730]

I mentioned this in my first post.

A more effective way to address Social Security challenges and help reduce the U.S. deficit would be to consider reforms similar to Sweden's 1990s model. Sweden transitioned to a notional defined-contribution (NDC) system, which linked benefits to lifetime earnings while ensuring fiscal sustainability through automatic adjustments for demographic and economic changes. This system introduced features like balancing mechanisms that adjust payouts based on the system's financial health. Sweden also supplemented the NDC with a guaranteed minimum pension to protect low earners. These reforms not only stabilized Sweden’s pension system but also significantly reduced the strain on its national budget. Adopting a similar system in the U.S. could create a self-adjusting framework, curbing the deficit while ensuring Social Security’s long-term viability.

[Tonster521]

@BrianL306623 I will be the first to admit that federal, state, and local income tax returns and the interpretation of the various tax rules and regulations are complicated. Whatever happened to Paul Ryan's approach about completing tax returns on the back of a post card? At any rate, to understand the Adjusted Gross Income (AGI) concept, you need to understand how this is used to develop a variety of tax rules and regulations. The proposals from John Larson and Bernie Sanders include implementing another tax (12.4%) which is in addition to the Net Investment Income Tax (NIIT or 3.8%)  which uses another concept called Modified Adjusted Gross Income (MAGI). For most folks, their AGI and MAGI are the same. However, there are items (i.e., municipal bond interest/dividends, etc.) that are not included in the AGI. So, the IRS requires that tax free income to be added back in to the AGI and now there is MAGI. The NIIT was introduced with the ACA in 2013.So, it has been around at least 11 years. So, unless your AGI or MAGI exceed the thresholds ($200 K single/$250 K married), you may not know this tax already exists. Both Larson and Sanders use this approach to implement a new 12.4% tax on certain investment income to fund the SS Trust and reduce the unfunded liability in the SS Program. If you have a chance, carefully read the last couple of paragraphs of Stephen Goss' Actuary Opinion for the above proposals as well as any of the other proposals that Gail1 linked for us. Rather than rewrite the Internal Revenue Code, I found a link to Investopedia that may help explain the NIIT concept. It does not include wages or salaries. Please click on the link in the article that explains AGI and MAGI. Also, you may want to look at Form 8960 which can give you an idea of where to insert a new line to report the 12.4% new tax if implemented. https://www.investopedia.com/terms/n/netinvestmentincome.asp In case, you miss the link for AGI and MAGI, I will try to copy and paste it here https://www.investopedia.com/terms/m/magi.asp I believe it would be helpful to look at Schedules 1,2, and 3 to review deductions, credits and other taxes that may be applicable. I simply used AGI instead of MAGI because for most folks it is the same and you don't need to calculate MAGI on a separate piece of paper or worksheet. Hope this helps with the AGI vs. MAGI concept. By the way, if you are wondering why I may have been hesitant to join a group to create another proposal, I hope you will see that it is quite complicated especially when both FICA revenue is being increased as well as some SS Benefits for certain situations. The work has already been done. The Actuary along with a number of other actuaries that are acknowledged in his letter must of cost a small fortune. It should be noted that Larson's proposal as is will only provide full SS Benefits through 2065 and 95% in 2066 when the SS Trust is depleted. However, it is projected ti increase to 98% payable by 2097. Sanders' proposal will provide 100% SS Benefits through 2096 and leave a $500 Billion ($.5 Trillion) surplus in the SS Trust at that time. In both proposals, the 12.4% (FICA) NIIT is required .    

[BrianL306623]

@Tonster521 I will look at what you provided and thanks. I understand your hesitancy and do not disagree. I still am curious as to whether the AGI/MAGI will replace the FICA. Because if it does not, as previously asked, So, now doesn't that mean that FICA is taken out twice, e.g., once from the paycheck and then again from the filing? If you already answered it and I did not catch it, feel free to point it out to me. 😉

[Tonster521]

@BrianL306623 I am unable to figure out how you are commingling AGI/MAGI with FICA. These are two different subjects. They do not replace each other. AGI/MAGI are sources of income. FICA are dedicated taxes. At the present, we pay FICA on earned income (i.e, wages, self employment income, etc.) only. There is a maximum each year indexed for COLA. It appears you understand that concept. We do not pay FICA  on unearned income (i.e., taxable interest, dividends, etc.). In 2013, the ACA introduced a new tax called Net Investment Income Tax (NIIT) that taxes unearned income 3.8%. You probably are not aware of NIIT because your AGI/MAGI does not exceed the thresholds($200 K single/$250 K married). So, now both earned income (your paycheck) and unearned income are taxable ( I will assume you have some bank interest). However, you did not have to pay the 3.8% additional tax on your bank interest because your AGI/MAGI (paycheck and bank interest) did not exceed the the NIIT thresholds ($200 K/$250 K). 

The proposals from Larson and Sanders will now introduce a FICA tax (12.4%) on unearned income (bank interest, etc.) in addition to the 3.8 % tax that has been in effect since 2013. If your AGI/MAGI exceeds the thresholds (varies depending on Larson or Sanders proposal), you will need to calculate both NIIT and the new FICA tax on your unearned income via Form 8960 and report on Schedule 2. Your earned income such as wages (paycheck) are excluded from the calculations for NIIT and the proposed new FICA for unearned income.How are you paying FICA twice on your earned income (paycheck)?

[BrianL306623]

@Tonster521 Let me try this. I do understand that AGI/MAGI are sources of income, and that FICA is a tax. Line 1A on the 1040 is that which is on box 1 of the W-2. This amount has already had FICA taken out, e.g., box 1 & box 3 (Social Security wages) are the same (at least on mine) as shown on box 4. So, line 11 on the 1040 is the AGI which comes from adding lines 1z, 2b, 3b, 4b, 5b, 6b, 7, and 8, and subtracting that on line 10 (Adjustments to income from Schedule 1, line 26).  So, if you use the AGI/MAGI to collect more SS taxes aren't you collecting FICA twice on the earned income because the AGI/MAGI is a combination of earned incomed and unearned income? Or is my thought boat totally sinking? 😉 I like the concept of taxing the unearned income to help with the trust funds although a lot of higher earners will not. So, if I am correct and that is still up for debate, wouldn't it be better to tax the unearned income another way?

[Tonster521]

@BrianL306623 I think you answered you own question. Currently, unearned income is taxed another way. The tax rules require completion of Form 8960 (look at line 17) and Schedule 2 (look at line 12) to develop the amount that may be subject to the 3.8% NIIT. Like all taxes, there are deductions and/or credits that may be applicable. This is why you cannot assume it is as easy as taking a number from line 11 on the 1040 - SR and use that amount to develop the 3.8%  NIIT and the proposed 12.4% FICA tax. Line 11 is the starting point for developing your Taxable Income for Federal Income Tax (FIT). 

Once again, you need to look at Form 8960 (line 17) and Schedule 2 (lines 12 and 21). If the proposed 12.4% FICA becomes reality, I suspect the above forms may be revised to include separate lines for the 12.4% FICA. While at Schedule 2, take a look at lines 4- Self Employed (Form SE), 5 - FICA and Medicare tax for unreported Tip Income, and line 6 uncollected FICA and Medicare tax on wages. The Schedule 2 line 21 amount is reported on line 23 on Form 1040 - SR.

I have some suggestions. First, if interested, study the IRC and/or take a course in Tax Preparation. Second, obtain tax preparation software if suggestion 1 is not doable. Third, use a qualified tax consultant/preparer. 

In an earlier reply, I included a link to info (current NIIT) that appears on Investopedia. It is easy to read when compared to the IRC. That article clearly states that Wages and Salaries are not  counted as Net Investment Income (NII). So, you will not pay FICA twice on your Wages and/or Salary (paycheck).

[MichaelM873962]

Hi All,

Does anyone know how to contact the CEO and board members of AARP? I'm interested in getting any official statement from AARP leadership on the various proposals in congress to address the long term solvency of the program. According to the WIKI page on AARP it was formed to lobby for the interest of people 50+. As paying members we should should have some visibility into the goals of the board and how to contact them. I can't find anything other than to post a question in the AARP chat board. My research so far indicates that board members work part time and may receive compensation of one million $ plus. There must be a way to contact them and/or get reports on the work they do. 

[BrianL306623]

@MichaelM873962 Good question. I sent an invite to connect with Reshma Mehta  Vice President, Campaigns at AARP, a 1 month ago, and never heard back even though we are 3rd level connections.  Do we even know who the names of the CEZO & Board members?

[GailL1]

@Tonster521 

Maybe you have lost me in the conversation but using the NITI manner of getting those with Net Investment Income to pay Social Security (and perhaps [more] Medicare) contribution taxes on this type income might still tax those who are already drawing a benefit.  

Would the SS benefit they receive get any higher?  

And, of course, there are all kinds of (legal)  tax-wise manners, one may get around these or at least minimize them.  Even the age old strategy of taking losses in a year when investment income is higher.  

I would assume that you are also talking about NITI being in the higher amount - how high?  

I don’t believe it is indexed to inflation either so just like the current levels of taxes on SS benefits - year after year, more and more people would be subject to it.

This would change the longtime manner of what a Social Security benefit is based upon - earned income.  

Again, I would have to ask how benefits would be figured to include this new source of revenues for Social Security- or perhaps there would be no benefit.

Just a more and more complicated tax structure - 

Just make Social Security another welfare program, take revenues from wherever and for whatever and then give it based on need - the neediest get the most - that should do a lot for our work performance.

[Tonster521]

@GailL1 I understand your reply and want to remind you that the solutions have already been developed by the proposals (i.e., Larson,Sanders, etc.). I have not contributed or suggested changes to any proposal, but are pointing out the key solutions from the proposals for increasing FICA revenue. I am not sure how the actuary developed the SS Benefit current unfunded liability (75 year), because it appears that amount has varied among the proposals. In Larson, it is approx. $22.4 Trillion. In Sanders, it is  approx. $20.4 Trillion. I would guess that it should be  the same number unless there is an explanation such as a different calculation date in the Actuary Opinion. At any rate, it is a large number somewhere between $20 and $22 Trillion. To make the SS Program viable for 75 years without reducing SS benefits in 2033, 2034, or 2035, the unfunded liability has to be funded along with annual SS Benefits. Otherwise, the SS Program as we know it will become a different program if it continues to exist. It can be replaced by a similar Program funded from the General Fund which will require  a significant increase in Federal Income Taxes (FIT). I am sure you can envision the current progressive tax brackets (especially the higher income brackets) increasing dramatically. This is how other countries cover the costs (benefits) of their social insurance programs. FYI, the USA ranks about halfway and is a deal for the higher incomes.

So, how does the SS Program raise $20 plus Trillion and over $1 Trillion per year for annual SS Benefits? You provided various options in one of your earlier replies. The answer that will cover the above shortfall and continue to provide unreduced annual SS Benefits for 75 years is to FICA tax other sources of income that have not been taxed for about 80 years. This approach was used by both Larson and Sanders. They simply followed the NIIT (3.8% tax) introduced in 2013 pursuant to the ACA . Just like all tax provisions, there are exclusions to the tax. The first exclusion is the thresholds (For Sanders $200 K single/ $250 K married). These thresholds eliminate about 70% of the taxpayers (my guess). Next, earned income (wages, self employed, etc.) which is already taxed is exclude as well as certain benefit payments (SS Benefits, IRA, 401 K, etc.). See the IRC because there are more exclusions. For a quick list of exclusions, see the instructions for Form 8960. I suspect the IRC will follow the same exclusions for the NIIT. Why make it more complicated? 

Lastly, I did not see a provision for increasing SS Benefits at the current third Bend Point for the folks who will be required to pay more FICA. There is some language about providing some benefit formula increases. However, I have not thoroughly read those provisions. As you probably know, I have been more concerned with managing the current SS Program and keeping it a going concern especially for the lower income folks which is subject to one's definition, but it probably represents about 70 % if the folks. Many do not elect to be in that statistic, but are dealt a "not so good" hand. Many play that hand the best that they can. 

I believe the time has passed to implement the solutions introduced in 2023. I am not holding my breath for any solutions in the next couple of years. 

[BrianL306623]

@Tonster521 Kaboom! That was my head exploding! 😉 I use TurboTax and MAGI does not come into play. I'm still confused! 😞 Not your problem, you have been very patient. Thanks.

[BrianL306623]

@GailL1 @Tonster521 Gail, I think that maybe Tonster meant the wages, not sure. At least that is how I took it because what you have just stated is taxing taxes!

[BrianL306623]

@Tonster521 @GailL1 @MichaelM873962 @RickS467730 @sktn77a Tonster, thank you for your recent contribution. While we cannot immediately replace the Senators and Reps, maybe there is a way to sway the incoming Congress. RickS467730 mentioned something that I am trying to expand on, e.g., “. . AARP encourages us to email Congress, they rarely offer concrete solutions themselves.” So, how do we get AARP, and I would still like to get the Unions and mass media involved, to use their ‘clout’ and membership to lobby Congress for the solution. There appears to be some agreement with raising or eliminating the cap, NOT raising the tax, raising the contribution from the higher earners.

Gail, you said you were on the Board, and I am presuming it is the AARP Board. So, how to we get AARP to be more involved rather than AARP asking their paid customers to write Congress, we need a concerted effort? Is this too big of an ask for AARP?

[GailL1]

@BrianL306623 wrote

“Gail, you said you were on the Board, and I am presuming it is the AARP Board.”

You presumed wrong - when I said I had been on this Board since 2008 - I was meaning this social media board - specifically the Social Security and/or the Medicare ones.

I am not even a member of the AARP - haven’t been so since about 2010.

[Tonster521]

@BrianL306623 The last I read, only 8 incumbents in the House lost their seats. Can you believe voters have reelected the same folks who have not focused on the SS Program which will deplete a $2.7 to $2.8 Trillion surplus in approximately 9 to 10 years? As I understand government, the House should represent the will of the people. This has not been the case for years and will continue until voters start rejecting this lack of representation (which in many cases is local) and start  voting people out of their seat in the House. It will hit home when their six figure paycheck and "gold plated" pension stop as well as other perks that come with being in the House. I applaud your enthusiasm, but sense the efforts will fall on "deaf ears" inasmuch as Party Politics will overrule the will of the people. I hope I am wrong. . 

[SteveM851726]

Tonster521, I got a message from you explaing WEP and why you think The Social Security Fairness Act is wrong. Fortunately the majority of Congress thinks you are wrong and they voted to repeal WEP and GPO. After these awful penalties are repealed why not come up with a better approsch to funding the Social Security Trust Fund for the long term. The 6 months sooner insolvency in 9 years is not a logical argument. Congress needs to fix the Social  Security Trust Fund revenue problem sooner rather than later. Don't take 40 years to fix like it has taken to undo the WEP/GPO. It is unfair that victims of WEP like me have to pay fully into Social Security to get a prorated benefit. Since I am subject to WEP my current income is taxed a full Social Security amount as if I was going to someday receive a full unreduced benefit. If I only had to pay a prorated Social Security tax from my current income then I wouldn't feel entitled to a full Social Security benefit, but that is not how it works. I currently pay twice as much into Social Security (and my employer pays the same amount) than I receive in Social Security benefits.

[BrianL306623]

@Tonster521 @GailL1 @MichaelM873962 @RickS467730 @sktn77a 

Tonster, I believe those flips are correct and I think there are still 3-5 seats to be decided. You bring up yet another good reason for term limits, yet will Congress vote to lose their 'power'? The problem with both parties is what I call deflection issues, e.g., border security, abortion rights, etc., that they use to gain the vote of the ill-informed voter. Remember James Carville and “It’s the economy, stupid”? Well, we need "It's Social Security, stupid". This does not mean those issues are not important, yet. we cannot rely on one issue voting.

@MichaelM873962 in a previous post you mentioned forming a group on https://www.meetup.com/home/?suggested=true&source=EVENTS. I am not familiar with it and although you mentioned a shared plan, maybe we do not need a shared plan per se if we can start with raising the tax cap so as we often hear, "Everyone should pay their fair share." Your thoughts?

PS @Tonster521 I still have my TI-2550 memory calculator! 😉

[BrianL306623]

@GailL1 @Tonster521 @MichaelM873962 Gail, Thank you for your explanation. Is the 'Board', an AARP Board? Did you all see this? What to know about the Social Security Benefits Fairness Act | AP News

I wonder what that will do to the strain on SS if it passes. One would think they come up with ways to increase pot rather than depleting it! 😞 

[Tonster521]

@BrianL306623 This proposed legislation has been referred to "The Social Security Unfairness Act". It is a "kick in the teeth" for the folks who have worked their entire career in employment covered by Social Security, paid FICA taxes for all that time (i.e., 35 years, etc.), and have waited (i.e., age 62, etc.) to start receiving SS Benefits. The WEP and GPO were created about 40 years ago to stop overpaying folks who worked their careers in non covered social security employment (i.e., local, county, Municipal, State, and Federal governments including some teachers, fire, police, etc.) and were able to work at least 40 Quarters (i.e., about 10 years) in employment covered by Social Security. Most of the covered SS employment occurs after they retire early (i.e., some as early as age 50) from their non covered jobs. It should be noted that these "government related" pensions are gold plated. Many of these Plans provide benefits at 2.0% to 2.5% per year of service. That means folks who retire with 30 years of service receive between 60% to 75% of their final earnings which may be based on a three or five year average. For comparison, the PIA formula for SS Program uses 35 years and requires age 62 (actuary reduced) in order to receive a SS Benefit. So, none of the folks with "government related" pension are anywhere near the poverty level. It is a shame if not deplorable that the House of Representatives would consider this legislation before considering addressing the SS shortfall and depletion of the SS Trust. This "Unfairness" legislation is estimated to cost the SS Program approx. $200 Billion and deplete the SS Trust about 6 months earlier. That means your SS Benefits will get reduced 6 months earlier. Isn't it good to know that you helped fund a "government related" pensioner with extra SS Benefits that are generally payable at the 90% Bend Point in the PIA formula? For the savvy investors reading this reply, that is referred to as a "7 bagger" and essentially risk free. I calculated the return based on AIME of $1,000 (FRA at age 66), and a 17 year life expectancy or age 83. We need to reach out to our Senators and let them know to reject this legislation. Your vote for their continued employment at about $175,000 per year is important.

[GailL1]

I replied to you on your question - now for my personal take on this.

IF it passes, I will be very pissed - maybe the WEP GPO formula reduction is perhaps off a bit for some but the concept of the reduction, to me, is solid.  Just fix the formula - make it manual if a situation like this occurs.

I do not understand why beneficiaries in this situation could not have their benefits figured manually - you know the ole pencil and calculator method accounting for their specific situation and figuring each benefit according to how they worked under a SS covered job for 11 - 30 years.  

[Tonster521]

@GailL1 The current reduction percentage (40%) is more than fair. Many folks who work 40 plus years in employment covered by SS receive less than 40%. Why should folks with "gold plated" government pensions receive 40% for working about 10 years or so after they retire early from a government job? In the SS Program it is only the lower income folks hovering near the poverty level that may receive  more than 40%. That was why the first Bend Point was established at 90% up to about $1,100 of AIME (currently). What is upsetting is that these government related pensioner want to be paid at 90% or close to 90% for minimal time worked and the House of Representatives approved this legislation. Lastly, I agree with your calculation methods. Full disclosure: I use a Texas Instrument calculator that I bought back in the 1970s for less than $20. It runs by light (even a lamp) and does need batteries. As a backup, I also use a pencil (with an eraser) and paper.  

[GailL1]

@BrianL306623 

You and others do know what this is - right?  The WEP and GPO reduction offset came about in 1983 as a result of a compromise between the House and the Senate - The House wanted the reduction to be 61%, The Senate wanted 32% so they compromised at 40%.  The reduction is a guesstimate or a general reduction since everybody who is involved int this situation is different and we have (1) basic benefits formula - so the current law is a way to add the fairness.   

CBO.gov - 11/08/2024 - Long-Term Effects of H.R. 82, the Social Security Fairness Act of 2023 

When already greatly in debt what‘s a few more million / billion ????

So what, if they get it - which I think is very unfair but it doesn’t seem that we can come up with a benefits formula just for these people since each situation is different.

But, hey, come 2035 or thereabouts, if the solvency issue isn’t addressed we will all get our benefits cuts by around 20% anyway.  

Per the highlights which answers your question - 

CBO’s analysis shows that the elimination of the WEP and GPO, as specified in H.R. 82, would permanently increase outlays for scheduled Social Security benefits—that is, the amounts that the program would pay if it continued to pay benefits as scheduled under current law, regardless of whether the program’s two trust funds had sufficient balances to cover those payments. That increase in Social Security benefits would drive the program’s spending even further above its revenues than it is already projected to be under current law.

The actual analysis

https://www.cbo.gov/system/files/2024-11/60876-HR82.pdf 

Read the analysis - it isn’t very long.  

Is there an offset?  I do not see one in the current legislation - cause there really isn’t one that would fit the Trust Fund.  

An older version would have offset it with the tax on benefits - but that’s just moving around already negative numbers.

[BrianL306623]

@MichaelM873962 @Tonster521 @GailL1 While that is a nice 6-year old solution, I wonder how that would fit in today with all the illegal immigrants, which BTW Mr. Reich only said immigrants not legal immigrants. Regardless, it also does not take into account Tonster521's PIA formula for high income folks. Maybe a combination thereof? Yet, as GaiL1 pointed out, there have been numerous 'proposals' over the years to 'fix' social security. So, it appears to me that what is really needed, besides a workable, comprehensive, & non-partisan solution, is a mass campaign that Congress cannot ignore. Hence, me original post to get AARP behind this, hopefully the unions, the media, and the millions of Americans who vote for the caste society, er I mean Congress. How do we do that?

[MichaelM873962]

 Does anyone know of a current or past congressional bill # that proposes a raise the cap on income subject to social security taxes? If not, my next goal is to get one drafted. An immigration reform proposal is also in play but secondary. I will also review the Biden "Inflation Reduction Act’s Medicare Prescription Drug Inflation Rebate Program" to work on a bill that would allow the government to get bids on drugs as not being able to do so is a scam by big pharma.

[GailL1]

Unbelievable - I have posted the source over and over and over, thru the years - cause there have been a ton of them.

SSA.gov - Office of Actuary - Proposals to Change Social Security or  Supplemental Security Income. ...

Since we are starting a NEW Congressional term in 2025 - they will all have to be reintroduced if they want to be considered - but why - they have gone nowhere to date - The WHOLE system has to be reformed because it seems they don’t just want to fix it - they want to EXPAND IT.

None of these or any other have been introduced with just the provision of expanding the tax maximum - it is a part of what they want to do, to pay for what they want to do to expand it.

Here are the latest ones - 

07/31/2024 - Protecting and Preserving Social Security Act by Mazie Hirono & Jill TaKuda. - update from a previous one of same name dated 07/21/2022

01/25/2024 - You Earned It - You Keep It Act by Angie Craig - she has submitted updates of this one for several years too before this one, one of the same name 08/16/2022

Social Security 2100 Act by John Larson - several updated intros - probably another attempt in early 2025 - 07/12/2023 and by same name with “A Sacred Trust” added in 10/26/2021

THIS ONE IS PROBABLY THE GRANDDADDY - at one time I thought it had promise but I guess it just didn’t expand it far enough so the author added more expansion and changed.

Medicare and Social Security Fair Share Act by Sheldon Whitehouse and Brendan Boyle 0711/2023. 

Social Security Expansion Act. by Bernie Sanders 02/13/2023 - S. 393 - update from previous one from 06/09/2022

The IRA has already established a way in which drugs in the Medicare Part D program are going to be negotiated - there is a schedule - They already did (10) of them effective in 2026 unless a court overturn it.  

CMS.gov - FACT Sheet 08/15/2024- Medicare Drug Price Negotiation Program: Negotiated Prices for Init... 

There are links at the top of this CMS FactSheet for info on the IRA, Prescription Drugs and The Medicare Part D program.  

[MichaelM873962]

 Thanks all, I found several bills targeted to correct social security after my last post. Sometimes new eyes are what's needed help move programs forward. I know my next steps and appreciate feedback. 

[GailL1]

@BrianL306623 

Do you know why the taxable maximum exist in the 1st place?  Because it is directly linked to the calculation of benefits - thus by limiting the taxable maximum, the maximum benefit is also limited.  Social Security calls this annual limit the contribution and benefit base.  As you said, this amount is also commonly referred to as the taxable maximum. For earnings in 2025, this base is $176,100.

That figure rises every year when there is a COLA - This figure is also firmly situated within what is known as the “middle class”especially if one lives in a high cost of living place in the US.  

CNBC.com 09/20/2024 - Middle Class Incomes by State 

Only extending the solvency of the program for 35 years is not the long range goal - 75 years is more like it AND the last sentence says a lot about why this change isn’t such a good idea if you want to keep the system as is and not just a welfare.system.

From your same CRS link:  

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.”

The SS Actuaries also realize that IF an employer has to suddenly increase the amount of matching contributions, especially if it is a lot, this could detrimentally affect employment or hiring of a range of employees to try to make up for some of their increased cost of employment.  

The SS Actuaries call this the “behaviorial” reaction by employer - they employers could also offer benefits or other compensation in lieu of some wage increases.  

Employees, especially in the higher cost levels, could also be reclassified depending upon their function in the company to be utilized more on a contract basis than salary - then the increase cost of matching contributions would be on the employees dime as a self-employed person. OR if they decided they could Incorporate, there would be NO contributions since their pay would be then a division of profits rather than a W-2 pay check.

How many people do you think are W-2 employees in these real high pay areas?  Like at $ 400,000 and above?  Would the system get more in contributions this way than say, increasing the rate of contributions for everybody incrementally?

There have been tons of proposals put forth to fix the system.  There have been numerous Administration appointed commissions to investigate and suggest proposals.  This has been going on since the early 2000’s.  Yet, here we are with no fix in store - 

For your reading enjoyment - ALL the proposals to change the System with SS Actuarial analysis of each one.  And of course, many of them want to extend or add benefits as well as making [some] people pay in more.  So pick one, pick several.  

SSA.gov Proposals to Change Social Security 

You think this is an easy solution just because it sounds easy to do and will affect those to whom many think can afford it, so to speak.  

This limit increases normally every year when there is any amount of inflation.  So it will probably get higher and higher every year without any action at all.  But the benefit calculations will stay the same unless we change that computation - but do we really want to do that - turn it into an even more progressive system than it already is at present.

This does nothing to fix our employment / contribution problems - it takes far less people to do jobs nowadays because of technology and that will probably continue.  And we haven’t figured out a way to tax technology for the Social Security system.  So (1) person is now paying into the system because they run some machine to do a job rather than the (10) that use to be needed to do the job.

Then we have the problem of people living longer and they draw their benefits for a longer period.  I think in the beginning the program was planned just to pay benefits for a few years before the person died.  Now it it 25, 30 or even more years of drawing benefits AND we have not changed the contribution rate for this longer draw rate.

Go back to the drawing board or the system will fix itself come 2035 or so when the law stipulate that benefits are cut automatically if benefits cannot be paid out of contributions.

SSA.gov - Social Security Trust Fund Data by year 1957 - 2023 

People need to learn how to save - A time when we can no longer work because of old age doesn’t just creep up on us overnight.  Social Security was never meant to be a total retirement program but it is for many.   SAD !