Social Security at risk, reforms needed – and popular

The historically nonpartisan Social Security Administration on July 3 sent an email to many Social Security recipients claiming Republicans’ newly approved budget reconciliation bill “eliminates federal income taxes on Social Security benefits for most beneficiaries.” However, the law does not actually eliminate federal income taxes on Social Security benefits. Instead, it gives a temporary tax deduction of up to $6,000 for individuals older than 65 with annual incomes less than $75,000 ($12,000 for married couples with incomes less than $150,000).

The email from President Trump’s handpicked Social Security Commissioner Frank Bisignano applauded the passage of the bill Republicans dutifully called the “Big Beautiful Bill,” but analysts say it will damage the New Deal program’s finances.

In the unusually political message, Bisignano – one of the country’s highest paid CEOs (reportedly receiving $100 million in 2017) at corporations including JPMorgan Chase and First Data – called Republicans’ measure an “historic step forward for America’s seniors” and a reaffirmation of the president’s “promise to protect Social Security.”

Among a range of misinformation about what the new law does is that the law does not protect Social Security. It will actually “hasten Social Security insolvency by a year,” according to Kathleen Romig, director of Social Security at the progressive Center on Budget and Policy Priorities. Several claims in the SSA email are “highly misleading,” Romig said.

“Most beneficiaries are NOT affected by the bill,” she continued, “for example, beneficiaries who don’t pay taxes on Social Security now (and most don’t). beneficiaries under age 65, beneficiaries with incomes above the bill’s phase-out [after 2028].”

Other experts also warn that its massive tax cuts, mostly for the wealthy, speed up when Social Security will no longer be able to pay out full benefits.

“By raising the standard deduction for all filers, and raising it even higher for some, fewer Social Security beneficiaries will pay taxes on their benefits, and those who do will pay lower rates,” said Romig and CBPP colleague Gbenga Ajilore. “Raising the standard deduction would deliver little to no benefit to lower- and moderate-income families while reducing income into Social Security’s trust funds.”

The conservative Committee for a Responsible Federal Budget (CRFB) agreed, estimating that the GOP package will accelerate the depletion of Social Security and Medicare’s trust funds.

Americans want reforms – improvements -- of Social Security, according to research from the nonprofit, nonpartisan National Institute on Retirement Security (NIRS), which found that Americans want action now on a long-term funding solution for Social Security. Eighty-seven percent say Congress should act now rather than waiting, and the sentiment holds across gender, age and party affiliation.

NIRS’ “Americans’ Views of Social Security” also found that 87% of Americans agree that Social Security should remain a priority for the nation regardless of budget deficits.

“As economic inequality continues to grow, Social Security has become an increasingly vital source of retirement income for most older Americans,” said NIRS research director Tyler Bond. “It’s not surprising that our research finds enormous bipartisan support for the program. Nearly all retirees receive at least some income from Social Security each month, and for some retirees nearly 90% of their income in retirement will come from Social Security.”

About 74 million Americans receive Social Security benefits.

“Today, Social Security’s trust funds have a combined reserve of $2.7 trillion, and spending has exceeded revenue since 2021,” said Bob Weiner, former Chief of Staff of the U.S. House Committee on Aging under Chairman Claude Peppers (D-Fla.). “If nothing changes, in 2033 Social Security benefits will automatically be slashed by 23%.

“The [bipartisan] Pepper-O’Neill-Reagan deal of April 1983 was intended to ensure the Social Security program’s solvency for decades. But budget cost-cutters jeopardized the program’s long-term solvency when they tried to take from Social Security’s surplus. Remember Vice President Al Gore famously called for the surplus to be put in a ‘lockbox’.”

At the top of options Congress could pursue to fix Social Security before 2033, CBS News business analyst Jill Schlesinger’s recommendation: “Raise the payroll tax cap: Social Security taxes only apply to income up to $176,100 in 2025. If you make more than that, you stop paying Social Security taxes on the excess. Lifting this cap could solve a big chunk of the problem.”

Congressman John Larson (D-Conn.) has tried.

“Billionaires like President Trump and Elon Musk don’t need another tax cut – they need to pay their fair share,” Larson said. “I offered an amendment to stop taxing seniors on their Social Security and enhance benefits for the first time in 50 years by ensuring the wealthy pay into the system just like the rest of us. Every single Republican voted to defeat it – going back on their promise to end taxation of Social Security benefits.”

Larson proposed lifting the FICA earnings cap on income to $400,000 “so millionaires and billionaires pay into Social Security throughout the year,” he said. (President Biden also had unsuccessfully proposed that.)

As Schlesinger said, the current SSA cap is $176,100, so whether you make $176,100 or $5,176,100, you pay in the same. (SSA adjusts the cap annually to keep pace with inflation.)

“This is an economic development plan because every single district gets payments to their district. For example, Mr. Chairman [Missouri Republican Jason Smith], your monthly payments are $310 million that come into your district. What do people do with that money? They spend that money right back in their district. At the grocery store, at the pharmacy, at the dry cleaner, putting gas into their automobiles, paying their rent, paying their mortgage.”

The proposal is “fully paid for,” Larson continued, “including the tax cut that President Trump promised and has reneged on. We pay for it by lifting the cap on people who pay nothing or little into the nation's number-one anti-poverty program for the elderly and for children.

“We have to act now, not just to protect Social Security but to expand the benefits,” he added. “It needs to be protected; it needs to be enhanced — not cut and diminished. My amendment does exactly what the majority says that we are here to do.”

However, his proposal was defeated by all the Republicans on the House Ways and Means Committee, whose members include U.S. Rep. Darin LaHood (R-Peoria), who also voted for Trump’s “Big Beautiful Bill.”

Republicans argument, as explained by the conservative Manhattan Institute, is “there is no magic proposal showing that lifting the limit will avert the need to raise the eligibility age or reform benefits,” said MI Senior Fellow Brian Reidl. “Raising the limit without adjusting benefits accordingly would delink the two, turning Social Security into more of a traditional welfare system. Uncapping the payroll tax would add a 12.4% tax-rate hike for higher earners, pushing the top marginal rates well above 60%.”

It’s been far higher. During President Eisenhower’s presidency (1953-1961) the top marginal tax rate was more than 90%.

“I commend President Eisenhower,” Larson said. “And actually [fellow Republican] President Nixon was the last president that expanded and enhanced Social Security across-the-board – because they knew exactly what it would do, but it's been more than 50 years since Congress has enhanced Social Security across-the-board.”