Raise Social Security $200 per month by taxing rich
Published 8:01 AM EDT Sep 12, 2019
Sen. Elizabeth Warren wants to raise Social Security benefits by $200 per month for roughly 64 million recipients by raising taxes on the top 2% of earners in the country.
Warren, who is vying for the 2020 Democratic presidential nomination, announced her plan ahead of Thursday evening’s third presidential debate. She says her proposal would pull some 4.9 million seniors out of poverty and extend solvency of the perennially underfunded Social Security trust fund by 19 years.
The proposal, Warren said, would lead to a nearly 25% increase in benefits for the bottom half of earners and a less than 5% increase for people in the top 10% of income distribution in the U.S.
“We need to get our priorities straight,” said Warren, touting her plan in a Medium post as the biggest boost to Social Security in nearly 50 years. “We should be increasing Social Security benefits and asking the richest Americans to contribute their fair share to the program.”
Warren has laid out a series of proposals including ones to end college debt, create universal child care and fight the opioid epidemic that she says she’d fund by taxing the mega wealthy through a $2.75 trillion tax on American households making more than $50 million annually.
But this plan to bolster Social Security, which will pay out more than $1 trillion in 2019, would also impact Americans who are wealthy, but are far from mega-millionaires.
She unveiled the plan hours before she hits the stage in Houston for the third round of Democratic presidential debates. The proposal comes at a moment where she and Vermont Sen. Bernie Sanders are neck-and-neck in many polls, but behind former Vice President Joe Biden, as they battle for support from the progressive wing of the Democratic party.
Like the other plans Warren’s floated, the proposal would likely face long odds in making its way through the Republican-controlled Senate.
How it would work
Social Security, which provides 90% of income for 21% of married recipients and 45% unmarried recipients, is funded by mandatory contributions to the Federal Insurance Contributions Act, or “FICA,” collected from workers’ paychecks.
The FICA contribution is 12.4% of wages, with employers and employees splitting those contributions equally at 6.2% each. (Self-employed workers contribute the full 12.4%.) If you’re a wage employee, you contribute 6.2% of your very first dollar of wages to Social Security, and 6.2% of every dollar after that — up to an annual cap, which is set at $132,900 in 2019.
Warren says if she wins the White House she’ll push to impose a 14.8% Social Security contribution requirement on individual wages above $250,000 — affecting less than the top 2% of earners — split equally between employees and employers. She would also require a 14.8% contribution on individuals making at least $250,000, or $400,000 for married couples, in net investment income annually.
“While most American workers contribute to Social Security with every dollar they earn, CEOs and other very high earners contribute to Social Security on only a fraction of their pay,” Warren writes of her plan.
She has plans: Elizabeth Warren: Send executives to jail for their role in the opioid epidemic
Texas in play? Can Democrats win Texas? Houston debate put Lone Star politics at the forefront
Mark Zandi, the chief economist at Moody’s Analytics, concurred with Warren that the extra revenue from wealthier taxpayers should keep Social Security solvent until 2054 and would also reduce the deficit. Social Security is currently projected to be solvent until 2035.
“The net macroeconomic impacts of the reform are small but positive in the long run; the economic benefit of smaller federal government deficits and debt load is largely offset as high-income people reduce their own work hours,” Zandi said. “The plan results in a much more progressive Social Security system, as high-income people shoulder the financial burden of the plan, while low- and middle income people benefit substantially. “