The vice president wants to change Social Security. He's not trying to keep this a secret. Biden had a plan to shake up the federal program when he was campaigning for the presidency.
Some of the president's ideas could be controversial. Not all of them Biden wants a change for most retirees.
The image is from White House.gov.
As a candidate, Biden promised to put Social Security on a path to solvency. His plan would accomplish the most if it was part of it.
Americans with high incomes would have to pay more in payroll taxes. He wants all income over $400,000 a year to be subject toFICA tax. Funds for Social Security are generated by FICA.
Income up to 147,000 a year is taxed at a rate of 12.4%. Employers and employees pay different amounts of payroll tax. Since they're both employees and employers, self-employed people have to pay the full amount.
Any income between $150,000 and $400,000 would not be subject to the FICA tax under Biden's proposal. The maximum amount that would be taxed would increase frequently. Over time, thedoughnut hole would decrease and disappear.
People don't like tax increases. It is an exception that most retirees should like.
Social Security needs to bring in more money or benefits will have to be slashed in the future. The program is projected to go bankrupt by 2034. Retirees who depend on their Social Security check as their main source of income don't want that to happen.
Benefit cuts would be avoided if the cap for income subject to the FICA tax was raised. The projected Social Security shortfall would be eliminated by taxing annual income of $400,000 or more.
Most Americans wouldn't be affected by Biden's tax increase. According to the IRS, less than 2% of US households made over $400,000 in 2019. Most retirees would benefit from preserving Social Security benefits.
Increasing the threshold for FICA taxes is supported by both Republicans and Democrats. According to a survey conducted by the University of Maryland's Program for Public Consultation, almost all of the Democrats and almost all of the Republicans want to make all income over $400,000 subject to the Social Security payroll tax.
Raising the FICA cap is the most likely change Biden wants to make to Social Security. The program would be strengthened. It hurts a small group of Americans and helps a lot of retirees. Both Democrats and Republicans like it.
The Social Security payroll tax should be applied to income over $400,000 according to a bill introduced by a congressman. It's a slam dunk. It's not really. It seems like its chances of becoming law are slim. Republicans haven't co-sponsored the bill.
The plan to raise the FICA threshold to bolster Social Security is likely to happen at some point. There are only a few good options for avoiding benefit cuts. Extending the retirement age wouldn't be enough on its own.
The change to increase payroll taxes will probably not be enacted soon. It could not happen under the watch of Joe Biden.
There's a disclosure policy at the Motley Fool.
All Rights Reserved © 2024
