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.
Sen. Begich’s bill will likely be introduced this week.