Social Security, which is the term used for the Old Age, Survivors, and Disability Insurance (OASDI) program, was first introduced to this country in 1935 as part of President Franklin Roosevelt’s Second New Deal.
Today, Social Security is relied on every month by roughly 61 million Americans, but according to the Congressional Budget Office, Social Security is facing a funding shortfall that could cause a more than 20% drop in those benefits by the year 2031. Bernie Sanders, the Independent Senator from Vermont, has recently introduced a bill that could expand Social Security benefits in order to address the potential shortfall.
Expansion of Social Security
The bill that Sanders, who has since been joined by several other members of Congress, introduced would expand Social Security benefits in a number of ways. First, the bill would change how cost-of-living increases are calculated. Currently, cost-of-living increases are calculated based on a typical urban wage earner’s expenses and needs. However, those costs vary greatly from the needs of the elderly. Thus, in an effort to more accurately reflect the needs of our elderly population and the expenses they face monthly, the new bill would change the formula currently used to calculate any annual cost-of-living increases in benefits.
Second, children would remain eligible for Social Security benefits through the age of 22 as long as they are full-time students. Currently, children who are eligible to receive Social Security benefits are only eligible through age 18 or until they graduate high school, unless they are disabled. Third, the formula used to calculate benefits for low-income senior citizens would be changed in order to increase their benefits by roughly $1,300 per year.
Funding the Expansion
To pay for the cost of the expansion, Sanders looks to increase the amount high-income earners pay into Social Security. In other words, the bill calls for increased taxation on higher-income earners. Currently, income over $132,900 is not subject to Social Security taxation. Bernie Sanders’ bill seeks to change that so that any income earned over $400,000 would be subject to Social Security taxation. Income ranging from $132,900 to $400,000 would remain tax free, but those high-income earners who make over $400,000 would be forced to contribute to Social Security. As it stands now, someone earning $135,000 per year pays the exact same amount into Social Security as someone who makes $800,000, for example.
The bill would also raise the 3.8% tax on investment income to 10%. Currently, income earned from interest, dividend, capital gains, or other investment income is subject to a surtax of 3.8%. The bill seeks to raise that surtax on high-income earners to 10%.
So far, Senator Kamala Harris from California, Senator Cory Book from New Jersey, and Senator Kirsten Gillibrand from New York, who are all Democratic Presidential candidates, have signed on as co-sponsors of Sanders’ bill. The bill is likely to pass the Democratic-controlled House, but it is unknown whether it will pass the Republican-controlled Senate. If it fails in the Senate, Social Security expansion will likely be brought up again in the very near future as an election hot-button issue.