More Dialog on the Employer Compensation Tax in the Wake of Mid-Term results - Financial Advisor
The Committee for a Responsible Federal Budget (CRFB) some time ago advanced a sweeping proposal, labeled an Employer Compensation Tax (ECT), to address Social Security’s looming insolvency problem. The proposal calls for employers to be subject to a tax on all forms of employee compensation, including all wages above and below the taxable maximum, employer-sponsored insurance, Health Savings Account contributions, employer retirement contributions, stock options, workers’ compensation premiums, and so on. Under this proposal, the employee side of the payroll tax equation would remain unchanged.
Financial Advisor's Tracey Longo, in a post yesterday on their website, examines the scope of this broad proposal (see this post for additional background on the ECT), noting that the ECT “… is drawing attention as Democrats take control of Congress and the retirement program approaches insolvency.” The ECT impact, of course, addresses the revenue side of the Social Security equation, as reflected in this quote from CRFB senior vice president and senior policy director Marc Goldwein: “I think it’s going to be almost impossible to have a real solution that doesn’t include some kind of increase in payroll tax.”
ECT is an Item to Consider, But Not the Only One
As noted in a recent post on the AMAC Foundation’s Social Security Report website, a full slate of ideas to reform portions of Social Security is vying for congressional attention. Organizations in addition to the CRFB, like the Economic Policy Innovation Center (EPIC), Progressive Policy Institute (PPI), CATO Institute, Brookings Institution, Urban Institute, and others have offered researched reform measures (in fact, using “insolvency” as a search term on this site will return a steady stream of information on what these organizations offer on this subject).
Joining this stream of ideas available to Congress is the Association of Mature American Citizens (AMAC) Social Security Guarantee (SSG). AMAC’s SSG is a packaged proposal to address insolvency, based on the premise that Social Security’s promise must be preserved and modernized to meet 21st-century economic demands.
AMAC’s Stance on Preserving, Protecting, and Modernizing Social Security
AMAC’s position is that Social Security solvency can be achieved without increasing the payroll tax rate through relatively minor program changes, including changes to the cost-of-living adjustment (COLA) process and modifications to the formulas that calculate payments to higher-income beneficiaries. AMAC's position also includes changes to the age at which benefits are maximized, along with steps to ensure that a larger percentage of total worker earnings are subject to FICA/SECA payroll taxes. Other changes advocated by AMAC include (1) an increase in the thresholds where benefits are subject to income tax; (2) indexing of these thresholds annually to account for inflation; (3) improved survivor benefits, (4) eliminating the reduction in benefits for those choosing to work before full retirement age; and (5) improved savings tools for future retirees, including a savings account that builds estate value.
AMAC is resolute in its mission to preserve Social Security for current and future generations and has drawn the attention of lawmakers in D.C., meeting with many congressional offices and staff over the past decade. Most recently, the suggested legislative framework has been reviewed with Social Security Administration officials. For more information on the AMAC proposal, read the “AMAC Social Security Guarantee” document on their website.
This posting is presented for informational purposes only and does not represent legal or financial guidance. Any opinions or interpretations presented are either those of the original author or, in the case of articles authored by the AMAC Foundation, are the opinions of AMAC Foundation staff, originally trained and accredited by the National Social Security Association (NSSA) and certified via the AMAC Foundation. Any links included in the article are valid on the posted date; socialsecurityreport.org cannot guarantee the duration of the links’ validity. NSSA and the AMAC Foundation and its staff are not affiliated with or endorsed by the Social Security Administration or any other governmental entity. To submit a question, visit our website (https://amacfoundation.org/services/) or email us at ssadvisor@amacfoundation.org. Because we are a non-profit organization, there is no charge for these services.