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October 29, 2021 at 12:57 PM
What You Need to Know
- Retirement expert Martha Shedden highlights provisions in the Social Security 2100 bill that will help Social Security overall.
- As with the Medicare tax, the Social Security tax should apply to all wages, she said.
- Young adults should become advocates for Social Security to get these changes made, she said.
Retirement expert Martha Shedden thinks Rep. John Larson, D-Conn., who introduced the Social Security 2100: A Sacred Trust bill Tuesday, has “done a great job overall.” But after going through the various sections, she called Larson’s office to ask why many provisions in the bill only last from early 2022 to year-end 2026.
The office explained to her that the five-year limit “is because they can’t submit a bill that isn’t funded,” said Shedden, the president of the National Association of Registered Social Security Analysts. “And since there is only one ‘strengthening item,’ which includes earnings over $400,000 [being subject to payroll taxes], they only could fund the bill for the additional five years.”
Currently, only earnings up to the tax cap ($142,800 in 2021 but increased each year) are taxed for Social Security. The $400,000 threshold is fixed, so over time the tax cap will rise to meet it and all earnings will be subject to the tax.
She says applying the payroll tax to earnings above $400,000 is the right thing to do, “but it should be like Medicare; all earnings should be taxed for Social Security.”
Although she’s disappointed that step wasn’t taken, “it’s better than nothing,” she says.
While the bill would extend the depletion date of the trust funds only to 2038 from 2034, Shedden was told that the bill would actually cut the funds’ actuarial shortfall in half.
