Your Payroll pros could be seeing some big legislative changes down the road to reduce the Social Security shortfall – especially since certain measures have significant bipartisan support.
In fact, both Republicans and Democrats are mostly in favor of altering the taxable wage base for Social Security benefits and other changes, according to recent data from a survey conducted by the University of Maryland’s Program for Public Consultation.
Top measures to eliminate Social Security shortfall
The survey asked Americans for their opinions on several methods of bolstering the Social Security reserves proposed by SSA and lawmakers.
Two options that would impact your firm and your Payroll department got overwhelming support from people on both ends of the political spectrum.
- Changing how the Social Security wage base works, making more wages subject to tax. The current Social Security wage base is $147,000, meaning many highly compensated employees don’t contribute to Social Security at all right now. Both Democrats and Republicans are in favor of making a big change to this system: 81% of Americans overall (88% of Democrats and 79% of Republicans) supported making all wages over $400,000 subject to payroll taxes for Social Security.
- Increasing the payroll tax rate for Social Security. Legislation currently caps payroll taxes for Social Security at 6.2%. Overall, 73% of Americans (78% of Democrats and 70% of Republicans) supported increasing the tax rate to 6.5%.
Together, these two changes alone would get rid of the bulk of the current Social Security shortfall. (61% would be eliminated by making more wages subject to the tax, and 16% would be eliminated by a tax increase.)
Other changes that could be implemented to ease the shortfall include:
- Raising the retirement age. In all, 75% of Americans surveyed (76% of Democrats, 75% of Republicans) were in favor of raising the retirement age to 68.
- Lowering benefits for the highest earners. Reducing Social Security payouts to the top 20% of American earners was supported by 81% of respondents (86% of Democrats, 78% of Republicans).
If no action is taken, the country’s in danger of running out of funds to provide full Social Security benefits by 2034, per the Social Security Board of Trustees, meaning that retirees would only receive partial benefits in 2035.
Because that deadline is drawing closer, it’s likely that at least one of these actions will be taken at some point soon. We’ll keep you posted on any new legislation coming down the pike.
