Why the Social Security COLA is much ado about nothing
Social Security benefits will be largely stable in real terms.
Recent projections show the Social Security trust fund will run out of money sooner than expected, meaning benefits would face a 22% cut by 2032 unless adjustments are made. Historically, any suggestion of tax hikes or benefit cuts in Social Security was considered politically unfeasible. However, some lawmakers, including Republicans, are now open to the idea of raising revenue through tax increases.
Rep. Tom Cole, R-Okla., said the mathematics of Social Security are beginning to outweigh political concerns, suggesting a review of the tax rate and the possibility of raising the income cap. Rep. Lloyd K. Smucker, R-Penn., indicated that raising the income cap could be part of the solution. Sen. Bernie Moreno of Ohio proposed a plan to raise more revenue through payroll taxes in a joint op-ed with Sen. Elizabeth Warren, who suggested removing the tax cap altogether.
Some lawmakers, like Sens. Sheldon Whitehouse and Tim Kaine, have proposed raising revenue by increasing the income threshold to $400,000 and subjecting investment earnings to the levy. Another proposal by Senators Bill Cassidy and Tim Kaine would rely on the stock market and a significant amount of fresh borrowing to cover the gap.
However, a recent report from Boston College's Center for Retirement Research suggests that this plan may not work due to market volatility.
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