Social Security undoubtedly is facing funding issues, and House Democrats are considering a massive tax hike as part of a bill to expand the country’s most important social safety net for older Americans.
According to the Social Security and Medicare Trustees, the program will face a $13.2 trillion shortfall from 2034 to 2092 as more and more Americans, particularly the baby boomers, come of retirement age. People also are living longer, which is putting even more of a strain on Social Security.
Medicare is reportedly in worse shape, facing a $37.7 trillion funding shortfall over the next 75 years.
The Social Security Disability Insurance (DI) Trust Fund will be under-funded by 2032, when it will only be able to pay 96 percent of scheduled benefits. The Old Age and Survivors Insurance Trust Fund (OASI) will be depleted by 2034 and only able to pay 77 percent of benefits.
Clearly there are problems, but according to Fox Business’s Jason Pye, Democrats are severely misguided in their approach to raise taxes.
Per Fox Business:
The House Subcommittee on Social Security recently held hearings on the Social Security 2100 Act, H.R. 860. The bill was introduced in February by Rep. John Larson, D-Ct., who chairs the subcommittee, and has more than 200 cosponsors, all of whom are Democrats. The bill is highly likely to get a vote in the House at some point during this Congress.
Although the Social Security 2100 Act would slightly increase benefits, it would gradually raise the Federal Insurance Contributions Act (FICA) tax, what most of us know as the “payroll tax,” to 14.8 percent from 12.4 percent, split between employers and workers. Sole proprietors, of course, bear the full brunt of the payroll tax.
A small business owner from Florida who testified before the subcommittee, Joseph Semprevivo, noted that the additional taxes would increase the burden on his business and his employees.
“This proposed tax increase would hurt my employees as much as it would hurt me and other small business owners. For many employees, the payroll tax is the biggest tax burden they face,” Semprevivo said. “It will prevent other workers from having the funds to make their car or housing payments. It will prevent others from having the funds to take a vacation.”
Not only would it hurt employers and workers, but young people would also be negatively impacted by a payroll tax increase. This particular segment of the American population is already struggling to pay student loans, find affordable housing and save for retirement. Raising their taxes for a program from which they will likely never benefit is an extra blow to their livelihood.
Although Democrats spend much of their time on the floor of the House or Senate and in committee railing against higher-income earners, the Social Security 2100 Act would, ironically, increase their benefits. Democrats are also touting their proposal as a tax cut for low and middle-income seniors. In practice, this will again have the opposite effect. The increased benefits for high-income seniors would necessitate a tax increase that will impact the very same people the Democrats claim to champion.
The House Democrats’ bill isn’t the way to address Social Security’s financial problems. There is another way, and it wouldn’t involve a massive tax increase on employers and workers.
Back in December 2016, then-Rep. Sam Johnson, R-Texas, introduced the Social Security Reform Act. The Social Security Reform Act would have made the program solvent, creating a $600 billion surplus while still expanding benefits, phasing out the tax on benefits, and providing an increased cost-of-living adjustment (COLA) for lower-income individuals. Higher-income earners would have seen a lower COLA. The Social Security Reform Act would have simply increased the retirement age to 69 from 67 and means-tested benefits for survivors, among other tweaks, to ensure the viability of the program.
Social Security has to be reformed if the program is to remain viable, but House Democrats’ plan falls far short of a serious proposal because the so-called “solution” is more of the same from the far-left: tax increases. That’s not a good way to have a necessary, long-overdue conversation about mandatory spending, which consumes a larger portion of federal expenditures with each passing year.