An exciting development is on the horizon for Americans, as a new proposal has emerged that could bring them an extra check. On February 13, 2023, Representatives Peter DeFazio and Bernie Sanders introduced the Social Security Expansion Act, aiming to provide additional financial support. Under this proposal, individuals currently receiving Social Security benefits would be eligible for the extra payment.
However, even if you are not currently collecting benefits, you could still claim this benefit if you reach the age of 62 in 2023. The proposed plan suggests an additional $200 per month alongside the regular monthly check. Over the course of twelve months, this would result in a total of $2,400. Undoubtedly, such a payment would provide much-needed financial relief to numerous Social Security beneficiaries.
Will Most Americans Face Increased Taxes for Social Security?
One of the notable advantages of this measure is that it will not result in increased taxes ( Check Collection )for the majority of Americans. In fact, approximately 93 percent of individuals earning $250,000 or less will not be required to contribute any funds towards it. As a result, Social Security beneficiaries can enjoy a win-win situation: receiving additional financial support without any additional tax burden.
With inflation and skyrocketing prices posing significant challenges, this extra support would help them navigate the rising costs and better meet their financial obligations.
The significance of offering checks like the proposed one to seniors cannot be overstated, primarily due to their depleted savings. An increasing number of seniors are reporting that they have exhausted their savings entirely. Compounding the issue is the fact that their income levels are considerably low. Many rely heavily on modest sources of income, such as Social Security benefits, and earn less than $25,000 annually. Hence, providing them with these checks becomes an essential lifeline for their financial well-being.
Understanding the Objective Behind This Social Security Proposal
The primary objective of this proposal is to ensure that every senior citizen in the United States can retire with dignity. Seniors and individuals with disabilities often find themselves in vulnerable positions, as they receive limited support from Social Security. The rising cost of living, coupled with high-interest rates impacting their savings, further exacerbates their financial challenges.
This proposal not only aims to increase Social Security benefits but also seeks to extend its solvency. According to a report from the Social Security Administration (SSA), in approximately ten years, there may not be enough funds to pay full benefits on a monthly basis. This could potentially lead to reduced payments or delays, and in the worst-case scenario, even bankruptcy if no action is taken. Consequently, the proposal intends to secure funding for Social Security for the next 75 years.
Although this proposal is currently in its early stages, if it garners the necessary support, it has the potential to positively transform the lives of millions of citizens who rely on Social Security benefits.
Will the majority of Americans face increased taxes for Social Security under the new proposal?
The Social Security Expansion Act proposes several tax changes that could have implications for taxpayers.
Apply payroll tax to more income:
Currently, wages are taxed at 12.4% by the Social Security program, but some income is exempt. The maximum taxable earnings limit in 2023 is $160,200, but it rises each year to keep pace with changes in general wage levels.
The Social Security Expansion Act would apply the payroll tax to all income over $250,000. This would create a temporary “donut hole” between $160,200 and $250,000, but the gap would close over time as the maximum taxable earnings limit continues to rise. Eventually, all income would be subject to Social Security payroll tax.
Social Security cost-of-living adjustments:
Under current law, COLA´s are determined based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
The Social Security Expansion Act would replace the CPI-W with the consumer price index for the elderly (CPI-E), which is expected to result in larger COLAs over time.
A new 16.2% tax on small business owners:
The Social Security Expansion Act would impose a new 16.2% “net investment income” surtax on entrepreneurial profits of small business owners above $200,000 for individuals and $250,000 for married couples.
This tax increase on small businesses could potentially stifle their growth prospects, hinder their ability to weather economic downturns, and impede innovation.
What is the Social Security Expansion Act and when was it introduced?
The Social Security Expansion Act is a bill introduced by Senators Bernie Sanders and Elizabeth Warren in Congress. It aims to expand Social Security benefits and ensure the solvency of the program for the next 75 years. The bill proposes several changes to the Social Security system, including:
- Boosting benefits by an immediate $200 per month for current Social Security recipients and those who will turn 62 in 2023.
- Setting a new per-person minimum benefit of 125% of the single-person poverty rate.
- Adopting a more generous Consumer Price Index (CPI) index for calculating benefit increases.
- Continuing benefits for the children of disabled or deceased workers up to age 22 rather than 18 for full-time students.
- Funding the Social Security system by imposing higher taxes on the wealthy and upper-middle-class.
The bill proposes taxing wages above $250,000 annually at the same rate as workers currently pay in FICA taxes (12.4%). Additionally, households with earnings above $200,000 (single) or $250,000 (joint filers) would pay a 12.4% tax on their investment earnings. S-corporation officers and limited partners would pay taxes at the combined Social Security + Medicare rate, or 16.2%
The Social Security Expansion Act was first introduced on June 9, and it has been reintroduced in Congress multiple times since then. The most recent reintroduction was on February 13. The bill has gained support from various lawmakers, including Senators Kirsten Gillibrand and Cory Booker, as well as Representatives Alexandria Ocasio-Cortez, Jamie Raskin, and Rashida Tlaib