More on the Downside of 2023’s COLA - Latin Post
The extraordinary cost-of-living adjustment scheduled to appear in January Social Security benefits is a welcomed influx of cash for the 70 million Americans dealing with the inflationary pressures so prevalent in the U.S. economy. An 8.7% bump will help many who are dependent on their Social Security benefit recover some of the ground lost to inflation over the past year, and that’s the upside. But, as explained in a post by Latin Post’s Mary Webber on latinpost.com, the exceptional COLA brings with it two considerable not-so-positive consequences.
First, as Ms. Webber points out, Social Security beneficiaries with combined adjusted gross incomes exceeding thresholds that have been in place for four decades–unadjusted for inflation–will see a higher base on which their federal income tax is calculated. AMAC Action, the Association of Mature American Citizens’ advocacy affiliate, has taken a stance on the inclusion of Social Security benefits in the gross income calculation via its support of The Senior Citizens Tax Elimination Act introduced in Congress, but starting next month, the impact will remain.
The second downside relating to the COLA for 2023 involves the long-term solvency problem facing Social Security. As many financial folks fear, the increased benefit payments are likely to further worsen the problem by more rapidly depleting the financial reserves (the combined OASDI trust fund). For example, the Committee for a Responsible Federal Budget suggests that the unusually large adjustment is “likely to bring the year of insolvency forward by a full year. It is just another reminder that procrastinating on addressing these imbalances leaves the people who depend on Social Security particularly vulnerable to a further deterioration in its finances.” The AMAC organization has taken a stance on this issue as well, promoting its Social Security Guarantee as a framework for legislative changes that would preserve the program for generations to come, without necessitating an increase in taxes on workers.