The latest proposal to be analyzed by SSA’s office of the chief actuary is Angie Craig’s (D-MN) “You Earned It, You Keep It” proposal (H.R. 8717).
Under this bill, starting in 2023 Social Security benefits would no longer be taxed. (Hence the name, “you earned it, you keep it.”) To make up for the lost revenue, transfers from the general fund of the U.S. Treasury would be made to the OASI, DI, and HI trust funds. In addition, payroll taxes—the 6.2% of wages each paid by the employee and employer—would be assessed on earnings over $250,000. This would leave a “donut hole” between the maximum taxable wage base, currently $147,000, and $250,000, of earnings that would not be taxed. Over time, as the average wage index rises, the maximum taxable wage base would eventually exceed $250,000 causing all earnings to be subject to payroll taxes.
If this bill were to pass as written, the trust fund would exhaust in 2060, 25 years later than currently projected, after which 90% of scheduled benefits would be covered by ongoing payroll taxes.
The bill was introduced August 16 and immediately referred to the House Ways and Means Committee. It is not likely to come up for a vote anytime soon. We just like to keep you informed of congressional action relating to Social Security reform.
To see the provisions and the effect upon the OASDI Trust Fund, see the Chief Actuary’s analysis.