( PART I I ) The Social Security 2100 Act Passed the House last Week - What Do you Think of It ?
This is the 2nd part of my synopsis of The Social Security 2100 Act which passed the House of Representative last week. I am posting the (8) different changes which this Bill advocates and then I have summorized them (in blue) as to what these changes mean. Part I covers Sections 101 - 103, Part II covers Sections 104 - 105 and then 201 - 204.
Seems it has a lot of what many will think is good - others perhaps not so much.
Just to keep you inform of the happening and open the door for discussion.
It has passed the House in this form - now what will happen to it, I don't know.
That could be greatly up to us.
4. Section 104. Replace the current-law thresholds for federal income taxation of OASDI benefits with a single set of thresholds at $50,000 for single filers and $100,000 for joint filersfor taxation of up to 85 percent of OASDI benefits, effective for tax year 2020. These thresholds would be fixed and not indexed to price inflation or average wage increase. The amount of revenue from taxation of OASDI benefits that would be allocated to the HI Trust Fund will be at the same level as if the current-law computation (in the absence of this provision) were applied. The net amount of revenue from taxing OASDI benefits, after the allocation to HI, would be allocated to the combined Social Security Trust Fund.
This section raises the base amount of income underwhich there is a tax assessed on Social Security benefits.
Currently (2018 tax year) the base limits are:
$25,000 – if taxpayers are single, head of household, qualifying widow or widower with a dependent child or married filing separately and lived apart from their spouse for all of 2016 (goes to $ 50,000)
$32,000 – if they are married filing jointly (goes to $ 100,000)
$0 – if they are married filing separately and lived with their spouse at any time during the year (no change)
It also specifies where these taxes will go -
Same amount as now to Medicare Part A - HI (Hospital Insurance)
( See #8 below - SECTION 204) The Social Security amount collected from these benefit taxes will go to the NEWLY created COMBINED Trust Fund of Old Age, Survivors and Disability - currently the Disability Trust Fund is separate but borrows money when needed (and repays) from the Old Age, Suviviors Trust Fund.
5. Section 105. - Holding SSI, Medicaid, and CHIP Beneficiaries Harmless – Ensures that any increase in benefits from the bill do not result in a reduction in SSI benefits or loss of eligibility for Medicaid or CHIP.
I understand this but don't quite understand how it will be done UNLESS they are going to raise some limits on
those other programs - then there is always the "EXTRA HELP" categories
6. Section 201 and Section 202. Apply the combined OASDI payroll tax rate on covered earnings above $400,000 paid in 2020 and later. Tax all covered earnings once the current-law taxable maximum exceeds $400,000.
Credit the additional earnings that are taxed for benefit purposes by: (a) calculating a second average indexed monthly earnings (“AIME+”) reflecting only additional earnings taxed above the current-law taxable maximum, (b) applying a 2-percent factor on this newly computed “AIME+” to develop a second component of the PIA, and (c) adding this second component to the current-law PIA.
This is how "raising the cap" will occur. Beginning in 2020, everybody will pay their payroll taxes based on the cap that will be set based on the maxium benefit, just like now - the 2019 cap is current at $ 132,900. However, in 2020, those making OVER $ 400,000 will also pay an additional payroll tax. It will continue on like this until the (2) CAPS meet - at that point and later, ALL earned incomewill be taxed for Social Security.
The second part of this deal with how these new payroll tax earning will be figured for inclusion into their benefits. In essense, it creates a new bend point and a new benefit calculation which will be used in figuring the upwards benefit of these higher income individuals paying more into the SS sytem.
7. Section 203. Increase the combined OASDI payroll tax rate to 14.8 percent, fully effective for 2043 and later. The combined rate is increased by 0.1 percentage point each year starting in 2020, reaching the ultimate 14.8 percent rate for 2043 and later.
Raises the rate of the Social Security payroll tax for the employer and the employee - very slowly.
8. Section 204. Beginning in 2020, establish a new Social Security Trust Fund by combining the reserves of the separate OASI and DI Trust Funds and managing all future financial operations of the program on a combined basis
Self expalanatory - just combining the Trust Funds of Old Age/Survivors and Disability.
A few times in our history, they have had to borrow from one another - don't think this is a big deal - we will still know the different benefit numbers.
For these proposals I am in favor of changing the Income tax threshold for filers as proposed. That provision is much needed as it will provide the bigest boost to beneficiaries of what has been presented so far here. I also support the specifiying where the taxes that are assessed are applied. Very common sense approach.
I think the progression of "raising the cap" on payroll taxes is a good common sense approach as well.