Big changes to Social Security could be coming.
A new proposal from U.S. Rep. John Larson (D-Conn.) calls for a benefit bump for current and new Social Security beneficiaries, an overhaul to how the annual cost-of-living adjustment (COLA) is formulated and increased payroll tax collections on the wealthiest Americans.
The legislation, dubbed “Social Security 2100: A Sacred Trust” was expected to be introduced Wednesday on Capitol Hill, but has since been delayed, according to Larson’s communications director, Mary Yatrousis.
Changes Proposed to COLA
Since 1975, Social Security benefits have been updated annually to keep pace with inflation. The 5.9 percent increase next year will be the largest in four decades, as inflation has shot up the cost of goods and services in the last year. Changing the method by which the annual COLA is calculated is one of the most significant changes in Larson’s proposal.
Social Security’s current cost-of-living adjustment formula is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Senior citizen advocates point out, however, that the CPI-W understates certain costs, such as health care and housing, which are especially critical for seniors. As a result, the Senior Citizens League reports that Social Security benefits have lost more than 30% of their purchasing power since 2000, owing primarily to insufficient COLAs and rising health care costs.
However, Larson wishes to change that. His proposal would tie the annual COLA to the Consumer Price Index for the Elderly (CPI-E). The Senior Citizens League previously estimated that if the CPI-E had been used to calculate COLA, an average beneficiary who filed for Social Security 30 years ago would have received nearly $14,000 more in retirement.
According to a fact sheet released by Larson’s office, “this provision will benefit seniors who are spending a greater amount of their income on health care and other necessities.” “Enhanced inflation protection will benefit retirees and widows in particular, as they are more likely to rely on Social Security benefits as they age.”
At the End of the Day
While the exact date of Larson’s bill’s formal introduction is unknown, it is clear that he and other Congressional Democrats are committed to making significant changes to Social Security. The plan calls for an increase in benefits, tying the annual cost-of-living adjustment to the Consumer Price Index for the Elderly, and taxing Americans earning more than $400,000.