When Americans think of retirement, the first thing which comes to mind is often Social Security and the second is often its solvency.
The program has remained largely unchanged since it was created in 1935. American workers and employers pay a payroll tax into Social Security, and when those Americans reach retirement age they are eligible for benefits based on what they paid in over their working lives.
As a member of the Ways and Means Committee, which has jurisdiction over Social Security, I am eager to work directly on solutions to strengthen the program and ensure it is working as intended for both current and future beneficiaries.
Earlier this week, the Board of Trustees for Social Security and Medicare Trust Funds released its annual report to Congress. Not surprisingly, the report revealed long-term fiscal shortfalls. It also projected next year Social Security’s costs would exceed its income for the first time since 1982.
With no changes to the program, the projected trust fund deficits will continue until all remaining funds have been paid out as benefits by the year 2035, after which point Social Security will only be able to pay beneficiaries a portion of their benefits.
The trustees’ report is alarming, and it is time for Congress to address Social Security’s insolvency head-on while ensuring it remains fair to American workers. Some in Washington want to delay the tough choices and move general funds to supplement Social Security without instituting any real reforms, while others have proposed raising taxes to cover the shortfall.
I have strong concerns about the regressive nature of payroll tax rates. For many lower income Americans payroll taxes are the biggest tax burden they face. Increasing the Social Security tax rate would hit the working poor the hardest.
Lifting the cap on income which is subject to Social Security taxes could fundamentally change the program, while also presenting its own set of new challenges. The cap, which is currently set at $132,900, is already subject to increase based on annual average wage growth. Removing this cap could create a new tier of Social Security benefits for millionaires and billionaires.
Alternatively, decoupling taxes and benefits would weaken the widely held view that all Social Security benefits are earned.
A modernized Social Security system would allow seniors to make their own retirement decisions rather than pressure them to conform to a one-size-fits-all program. Workers have paid taxes into Social Security with the expectation their benefits will be there in retirement, and they should be able to choose the method of receiving these benefits which best suits their needs.
For example, while seniors can already earn increased benefits by delaying benefits beyond their full retirement age, I have supported a proposal which would allow those who choose to take a portion of this benefit increase as a comparable lump sum instead of an addition to their monthly benefit. This additional option would ensure seniors who choose to remain in the workforce beyond their full retirement age have greater flexibility to determine how they access their benefits while leaving the program unchanged for those who chose to claim benefits earlier or receive the traditional increased benefit for working longer.
Millions of Americans depend on Social Security as part of their retirement, and they are also depending on us to do the hard work to shore up the program and protect beneficiaries. Despite the many fiscal challenges we face, I will continue working to on solutions to restore solvency to Social Security and protect hardworking Nebraskans.
Adrian Smith represents Nebraska’s 3rd District in the House of Representatives.