Sen. Bernie Sanders, I-Vt., today introduced a bill that, if passed by Congress and signed by the president, would insure Social Security's solvency for the next 75 years—without having to cut a single person's benefit.
Sanders' solution is simple: gradually eliminate the cap on wages subject to the payroll tax, starting with people earning more than a quarter-million a year.
His "Keeping Our Social Security Promises Act" has the endorsement of some key senators, including Democratic Sens. Daniel Akaka, Patrick Leahy, Barbara Boxer, Claire McCaskill, Sheldon Whitehouse, Al Franken and Richard Blumenthal. In the House, Rep. Peter DeFazio, D-Ore., introduced a companion bill.
"The most effective way to strengthen Social Security for the next 75 years is to eliminate the cap on the payroll tax on income above $250,000," Sanders said in a prepared statement. "Right now, someone who earns $106,800 pays the same amount of money into Social Security as a billionaire. That makes no sense. The Keeping Our Social Security Promises Act will ensure the long-term solvency of Social Security without cutting benefits or raising taxes on the middle class."
The $106,800 Sanders referred to is the current payroll tax cap. Here's how the Sanders bill eliminates that cap over time: In the first year the bill is in effect, people earning less than $250,000 but more than the cap would not pay any additional payroll tax, while those earning more than $250,000 would pay the tax on that portion of their earnings in addition to what they earn up to the cap. In other words, there is a tax-free "doughnut hole" between the cap and the $250,000 threshold.
As the payroll tax cap increases over time based on average wage increases, as it would under current law, the doughnut hole would shrink, and eventually disappear. At that point, all earned wages would be subject to the payroll tax.
This is a variation on what President Obama proposed as a presidential candidate for addressing the long-term Social Security solvency issue, Sanders said today.
Instead of any discussion of cutting Social Security benefits in any way—whether by raising the retirement age or through imposing a "chained CPI (consumer price index)" formula that would erode the buying power of seniors over time—the conversation should be about passing a measure such as this one. Let's get this bill on the forefront of the discussion about securing Social Security's future, and tell the White House, the deficit-reduction "supercommittee," and anyone else who has their budget knife out under the mistaken notion that Social Security contributes to our deficit problems (it doesn't), "No cuts to Social Security."