I just received in the mail yesterday news on a Social Security Expansion bill (S. 567) which I believe is desperately needed. But more on the reasons why a bit later. (Which I only learned about myself from a new book on Social Security I've been reading, )
This expansion bill called the "Strenghthening Social Security Act" was actually introduced in the last congress by Sen. Tom Harkin. This landmark legislation would:
1) Gradually increase benefits by approximately $70 a month by changing the way the Social Security benefits are computed.
2) Ensure all retired Americans get a fair and larger Social Security COLA - one that truly reflects the cost of living, including medicines, food and fuel.
3) Extend the long term solvency of Social Security by almost two decades simply by finally making millionaires pay their fair share into this program (since most millionaires still demand their own .S.S. cut). The change would be to the payroll tax cap and would mean someone making $3 million a year would pay the same percent as an ordinary bloke earning $30,000 a year.
Why the need for this expansion? Because we are already suffering from cuts that are working their way toward rendering every ordinary senior on a track to cat food. I wasn't aware of this until reading the book, Social Security Works by Nancy J. Altman and Eric R. Kingson. A few of the findings that blew my mind (pp. 60- 61):
1) The 1983 Social Security enactment -amendment effectively phases in a two year increase in the full retirement age from 65 to 67 and has already lowered benefits by about 6.5 percent. When fully phased in, the delay of 2 years to defined "full retirement" will effectively cut the benefits to those born in 1960 or later by around 13 percent.
2) It does not matter whether you claim benefits at 62 or 70 or somewhere in between you can never 'catch up" and the cuts will wreak their havoc over time year by year.
3) Decisions made in 1983, 1993 to treat a growing portion of Social Security benefits as taxable income will effectively lower benefits by 9.5 percent in 35 years.
The last is especially nasty. Prior to 1983, Social Security benefits were tax free. Since 1984, up to 50 percent of Social Security benefits have been counted as taxable income for individuals in excess of $25,000/ yr. and couples in excess of $32,000/ yr.
Since 1993, additionally up to 85 percent of Social Security benefits have been taxed for some individuals with incomes in excess of $34,000, $44,000 for couples. It is almost as if the benefits are given with the right hand and taken away with the left hand of gov't!
Worse, because the above thresholds are not adjusted for inflation, the reduction in benefits increases over time. The effective cut was, on average, 6 percent in 2012 and will be 8.8 percent by 2030 and 9.5 percent by 2050.
Did you know about any of these existing cuts? I didn't - other than the first threshold for benefits cuts via taxes.
How bad it can get was recently described in an article in MONEY magazine (March, p. 42). They use the example of a retiree in the 15% tax bracket who is taxed 50 % on his Social Security. If he earns another $1,000, his "combined" income rises that much too, subjecting another $500 of Social Security to income taxes. So, the tax bill on that $1,000 will not be $150 (15 percent of $1,000) but $225 or an effective tax rate of 22.5%.
All of this in concert screams for an expansion of Social Security and the sooner the better. Otherwise seniors will be subject to an ongoing "race to the bottom" - and that's assuming the billionaires like Peter G. Peterson don't get their way in cutting it further via a "chained CPI".
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