Bernie Sanders Submits New Social Security Reform Proposal

By Elaine Floyd, CFP ®

It’s a refresh of a former proposal Bernie Sanders and Elizabeth Warren submitted a couple of years ago. But it garnered attention this week when the SSA Office of the Chief Actuary published its response to Bernie’s request for an analysis of the proposal’s effect upon the system. According to the projections, Bernie’s plan would restore full solvency to the Social Security system for at least the next 75 years.

It would do this by taxing earnings above $250,000. As long as the maximum taxable wage base (currently $160,200) remains below $250,000, a “donut hole” would exist between the current wage base and the $250,000, where no earnings would be subject to payroll taxes. But once inflation pushes the wage base above $250,000, all earnings would be subject to the 12.4% Social Security tax (half paid by the employer, half by the employee), in addition to the current 2.9% Medicare tax on all earnings.

In addition, the proposal would impose a separate 12.4% tax on investment income above $200,000/$250,000 as defined in the Affordable Care Act.

On the benefit side, the proposal would raise the first bend point multiplier to .95 from .90, base the COLA on the CPI-E instead of the CPI-W, and continue dependent benefits until age 22 if the child is in high school, college, or vocational school.

At this point the proposal hasn’t even been introduced in the Senate. When it is, it will likely languish like other bills introduced by Democratic legislators. Republicans, meanwhile, are batting around ideas for Social Security reform in their “working groups.” They are mainly talking about raising the full retirement age, which amounts to a benefit cut phased in over time. Although it was feared that Republicans would try to cut Social Security spending immediately in their attempt to keep the debt limit from being raised, nearly all public statements by Republicans have refuted that. According to the New York Times, Republican leaders in Congress have stressed in recent days that, despite the calls from some conservatives to link safety net spending and the debt limit, they will not seek those changes as part of an agreement to raise the nation’s borrowing cap.

Read more about Bernie’s proposal here.

As director of retirement and life planning for Horsesmouth, Elaine Floyd helps advisors better serve their clients by understanding the practical and technical aspects of retirement income planning. A former wirehouse broker, she earned her CFP designation in 1986.



The answer of course to all leftists is tax people more! I have a novel idea; reduce spending.

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