In a new report by the Heritage Foundation, experts found that the new proposal from Democratic lawmakers to make Social Security solvent while adding to its liabilities and $33.8 trillion in new taxes fails to calculate the damaging aftermath on the United States economy leading to reduced growth, job loss, and the restriction of income growth that would otherwise boost Social Security’s revenues.
According to Rachel Greszler, a Senior Research Fellow at the Grover M. Hermann Center at the Heritage Foundation, the Social Security Expansion Act introduced by Vermont Senator Bernie Sanders and Massachusetts Senator Elizabeth Warren, along with Illinois Democrat Representative Jan Schakowsky and Oregon Democrat Representative Val Hoyle includes four benefit expansions and three massive tax hikes for future generations.
The four benefits outlined include a massive and permanent benefit increase for all Social Security recipients in 2024, better cost-of-living adjustments (COLA), an increase in the minimum benefit for individuals with 30 or more years of earnings, and the continuation of children’s benefits through age 22 instead of 18.
However, the report notes require current working Americans and their children to pay for these new benefits, resulting in raising and eliminating the payroll tax cap. The new legislation would add Social Security’s 12.4 percent tax to all earnings above $250,000 with no benefits for newly taxed earnings. Researchers note that given the gap in earnings between the $160,200 cap and the $250,000 threshold, the cap would continue to increase with inflation, resulting in all income being subject to the Social Security tax after 15 years.
Another tax that young Americans would have to deal with should the proposed measures become law includes a 12.4 percent surtax on investment income of individuals making over $200,000 and married couples making over $250,000. For Americans currently owning small businesses or wanting to start a business, the new legislation would impose a 16.2 percent “net investment income” surtax on all entrepreneurial profits of these business owners above $200,000 for individuals and $250,000 for married couples.
12.4 percent of the 16.2 percent tax would go to Social Security, and the other 3.8 percent would go to general tax revenues. As a result, current small and large businesses and future businesses would face a lack of economic growth and be unable to stay alive during economic downturns and lose any chance of innovation.
While Senator Sanders and other House Democrats and Senators say that the Social Security Expansion Act will not raise “taxes by one penny on over 93 percent of American households that make less than $250,000,” the report from Heritage finds the claim to be untrue, given that current and future individuals making more than $200,000 have to take in the bill’s enormous tax hikes.
Current and potential business owners who have to pay higher Social Security taxes for their workers will have to reduce their wages to the level of the amount of taxes, resulting in lower incomes.
According to Heritage, the new legislation proposed by some of Congress’ most Progressive and left-leaning lawmakers would try and pay for other measures like Medicare for all, free college, universal basic income, and the “Green New Deal,” costing Americans and future generations around $50 to $90 trillion in the next decade.
When asked to comment on the proposed legislation, a spokesperson for the Social Security Administration referred to the agency’s recent press release about the 2023 Social Security Trustees Report.
“The total annual cost of the program is projected to exceed total annual income in 2023 and remain higher throughout the 75-year projection period. Total cost began to be higher than total income in 2021. Social Security’s cost has exceeded its non-interest income since 2010,” read the 2023 Annual Report to Congress.
“The total annual cost of the program is projected to exceed total annual income in 2023 and remain higher throughout the 75-year projection period. Total cost began to be higher than total income in 2021. Social Security’s cost has exceeded its non-interest income since 2010,” officials said.
Despite the calls against reforming Social Security, Democrat lawmakers have condemned Republican officials for suggesting ideas like raising the retirement change, arguing instead for more government spending into Social Security to save it from being insolvent. Following the passing of the Inflation Reduction Act by the Democrats in Congress and President Biden, current Americans on Social Security have faced enormous costs of consumer goods and seen their savings diminished.
Experts in the report outline how lawmakers can preserve Social Security for current and future Americans by transitioning toward a universal benefit that would increase benefits for lower earners and reduce benefits for higher earners so that workers entering the labor force and retiring obtain the same flat Social Security benefit, keeping more individuals out of poverty.
Other measures that analysts say could improve and strengthen Social Security include allowing American workers to have the ability to put part of their Social Security taxes into an account they own, resulting in greater positive returns passed on to their families.