My Novice Thoughts on Bernie Sanders Tax Plan #2: Expand Social Security
Updated: Oct 15, 2020
This page makes a lot of different aspirational points, but I am only going to talk about how to pay for it, and what is being proposed on these links.
At a time of massive income and wealth inequality, the wealthiest Americans in this country must pay their fair share into the system. Today, a billionaire pays the same amount of money into Social Security as someone who makes $132,900 a year because the Social Security payroll tax is capped.
Bernie’s Social Security plan would lift this cap and apply the payroll tax on all income over $250,000 in order to accomplish four things.
First, we will make sure that Social Security will pay every benefit owed to every eligible American for the next 52 years.
Second, we will expand benefits across-the-board including a $1,300 a year benefit increase for seniors with incomes of $16,000 a year or less.
Third, we will lift millions of seniors out of poverty by increasing the minimum benefits paid to low-income workers when they retire.
Fourth, we will increase cost-of-living adjustments to keep up with the rising cost of health care and prescription drugs by establishing a Consumer Price Index for the Elderly.
First, the reason why the Social Security / FICA tax is capped is because it caps benefits. Why? Because it's based on the Social Security Wage Base.
Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program limits the amount of earnings subject to taxation for a given year. The same annual limit also applies when those earnings are used in a benefit computation. This limit changes each year with changes in the national average wage index. We call this annual limit the contribution and benefit base. This amount is also commonly referred to as the taxable maximum. For earnings in 2020, this base is $137,700.
Will this uncapped amount also uncap benefits? Yeah... right. I look at it like the Medicare/IRMAA (Income Related Monthly Adjustment Amount) where you pay more, but don't get any additional benefit for doing so.
Here are the Office of the Chief Actuary of the Social Security website. https://www.ssa.gov/cgi-bin/netcomp.cgi?year=2018
This additional tax will affect the top 5% of wage earners. Sounds like "the rich"... right? That's only those who are earning $140,000+. That doesn't sound like "tax the rich" and "go after billionaires". It sounds more like they're going after YOU.
I help my clients to challenge any political administration's right to tax everything you do successfully so that YOU are the primary beneficiary of your life's work, not the banks, financial institutions, Wall Street, and the Internal Revenue Service.