Senator Mazie Hirono (D-HI) and Representative Jill Tokuda (D-HI) have introduced the Protecting and Preserving Social Security Act to address Social Security’s long-term financial state by changing how benefits are adjusted for inflation and how payroll taxes are applied to higher-income earners.
The Social Security Administration’s Office of the Chief Actuary claimed that this bill would allow the Old Age, Survivors, and Disability Insurance (OASDI) program to pay full benefits for an additional 19 years and move the projected depletion date from 2035 to 2054.
A New Inflation Measure
Annual cost-of-living adjustments (COLAs) for Social Security recipients are currently based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. The bill would change this by using a new inflation measure called the Consumer Price Index for the Elderly (CPI-E).
The bill would require the Bureau of Labor Statistics to publish the CPI-E to monitor changes in the cost of goods and services generally purchased by Americans aged 62 and older.
Additionally, if Social Security benefits increase due to the new CPI-E inflation measure, the extra amount will not be counted when deciding if someone qualifies for SSI or Medicaid.
Phasing Out the Cap
Social Security payroll taxes are currently applied to wages and self-employment income up to a certain annual limit, which is known as the contribution and benefit base. Earnings that go beyond this threshold are not subject to payroll taxes.
However, according to the press release, this cap would phase out over seven years so that all earnings would eventually be taxed regardless of the amount.
Lawmakers said this change would make the wealthiest Americans pay more into Social Security and provide modest benefit increases for those who pay above the previous cap using a special formula. The changes will apply to people who become eligible for Social Security benefits after 2023.
This bill has received endorsements from the National Committee to Preserve Social Security and Medicare (NCPSSM), Alliance for Retired Americans (ARA), and Social Security Works (SSW).
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