Sitka News reports Senator Mark Begich (D-Alaska) is prepared to introduce legislation to protect and preserve Social Security benefits for future generations, while shoring up the system’s long-term solvency.
Senator Begich introduced his plan in response to President Obama’s proposal to switch to the Chained CPI, which would cut annual cost-of-living increases for seniors and veterans on Social Security. The Senator’s plan to shore up Social Security is based on two key elements:
- Scrap the cap on taxable income: ”Current law sets a cap on contributions for higher income earners; this year they quit paying when their wages hit $113,700. By phasing out this cap, which has essentially become a tax loophole, more people would pay into Social Security all year long. As a result, the solvency of the trust fund would be extended for about 75 years.”
- Change to the CPI-Elderly, instead of the Chained CPI: “Replace the current system for calculating cost-of-living adjustments to more accurately reflect the cost-of-living for seniors. This would replace the consumer price index (CPI) for workers with a CPI-E, which reflects costs for seniors and would increase their benefits.”
Scrapping the cap on taxable income would all-but guarantee Social Security’s long-term financial solvency by ensuring all Americans contribute equally to Social Security. Currently, people earning over $113,700 don’t pay into Social Security on that income – and capital gains income is not subject to Social Security taxes. For example, in 2012 Wal-Mart CEO Mike Duke paid a Social Security tax rate of 0.5% on $1.3 million in wages, while Wal-Mart retail employees paid the full rate of 6.2% on their average wages of $22,100. Scrapping the cap would ensure workers and CEOs alike pay the same rate into Social Security.
Switching to the CPI-Elderly (CPI-E) is a technical fix that will ensure cost-of-living adjustments more accurately reflect costs seniors face. While the current CPI measure assumes seniors are buying iPads and new cars, the CPI-E would give greater weight to health care costs and prescription drug prices on which seniors spend more than the average consumer.
Read Sen. Begich’s bill will likely be introduced this week.