By Kerry Pechter | Care of Retirementincomjournal.com
With the presidential election looming, the candidates’ views on Social Security and how to “fix it” are important to those who follow retirement policy. The president has made non-specific promises to maintain the program. Former vice president Joe Biden has specific proposals.
In a recent report, the Urban Institute, a progressive Washington think tank has reviewed the Biden plan. According to the report, an incoming Democratic administration would raise benefits for almost everybody and collect more taxes from those earning more than $400,000.
That is, someone with an income of $500,000 would pay $12,400 more in payroll taxes. Eighty-seven percent of the additional payroll taxes generated by Biden’s plan in 2065 would be paid by Americans in the top one percent of the income distribution, the report said.
Surprisingly, the Biden plan doesn’t fully address the Social Security funding gap.
“Our projections indicate that Biden’s plan would close about a quarter of Social Security’s 75-year deficit and extend the life of the trust funds by five years,” the report said. “Additional revenue sources would be needed in the future for Social Security to pay the full benefits scheduled under Biden’s plan.”
Overall, the Biden plan reflects the thinking of those, including the Social Security Administration’s own chief actuary and experts like Alicia Munnell of the Center for Retirement Research at Boston College, who have maintained for years that there’s no “crisis” in Social Security that would require radical change, such as partial privatization.
Resistant to the neoliberal thinking that favors privatization—since the 1970s, some economists have argued that payroll taxes shrink private savings and investment—Social Security advocates have said that an increase in the payroll tax by a few percentage points or the level of income covered by it, plus a few tweaks to benefits, would enable the program to pay all promised benefits for the foreseeable future without violating existing funding rules.
Here are the specifics of the Biden plan, according to the Urban Institute:
President Trump has announced no specific Social Security plan. According to the Urban institute, in an August 2020 news conference, he suggested eliminating the Social Security payroll tax and financing benefits through transfers from the federal government’s general fund. Trump did not specify how the federal government would pay for those transfers, especially given the government’s expected $3 trillion deficit this year.
Marc has 36 years in financial services and 6 years in teaching.
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