While nobody has a crystal ball that can predict how Americans will vote and there's quite a bit that could happen between now and the November election, it's important for Americans to consider the "what ifs." Democratic nominee Joe Biden has consistently led in the polls thus far and has expressed support for some major Social Security changes designed to help boost the program's financial condition.
With that in mind, here are three potential changes to Social Security we could potentially see in the coming years if Biden wins the White House that could affect your paycheck or your benefit checks.
Image source: Getty Images.
Higher Social Security taxes for top earners
There are two basic ways to increase revenue to Social Security. First, the Social Security tax rate (currently 6.2% for both employers and employees) could be increased. Second, the amount of income subject to the Social Security tax could be increased. Currently, the 6.2% rate is only applied to the first $137,700 in income -- anything above that is exempt.
Biden is a fan of the second method, but only wants to raise Social Security tax on the highest earners. Specifically, Biden's plan calls for applying Social Security tax to earnings over $400,000. So, we'd effectively have three Social Security tax brackets:
- 2% applied to income from $0-$137,700.
- 0% applied to income from $137,701-$400,000.
- 2% applied to income greater than $400,000.
This would be a big tax increase on higher earners. Those who earn $1 million today would only pay $8,537 in Social Security tax in 2020. Under Biden's plan, they would pay $45,737.
Increased benefits for the oldest Americans
Biden's plan doesn't just want to increase income to Social Security, but also wants to use some of the higher tax revenue to increase benefits for certain people.
One component of Biden's plan calls for increasing benefits by 5% for retirees who have been receiving benefits for 20 years or more. The reasoning is that the oldest segments of the population are most likely to run into problems with their savings running low, and this is designed to protect their financial stability.
Higher minimum benefits for all retirees
There currently is a minimum Social Security benefit, but quite frankly, it isn't enough for anyone to live on as their only source of income. Biden's plan calls for setting a minimum benefit for workers who have 30 years of Social Security covered work, equal to at least 125% of the federal poverty level.
In 2020, for a one-person household, the federal poverty level is $12,760. So, this proposal would guarantee all 30-year workers at least $15,950 in annual Social Security benefits ($1,329 per month).
Biden's plan would make a few other notable adjustments, such as increasing survivor benefits for widows and widowers, and making it easier for workers who also qualify for a pension to get their full Social Security benefit.
Will it solve the problem long-term?
To be clear, Biden's plan is one of the less comprehensive of the Democratic presidential candidates, and while it would certainly improve the program's solvency, it wouldn't completely solve the funding problem. In other words, there would still be further changes needed down the road to ensure the program didn't run out of money. In fact, a Wharton School analysis finds that Biden's plan would reduce Social Security's 75-year deficit from 3.55% of taxable payroll to 2.01%. This is a clear improvement, but it's still a substantial deficit that will eventually need to be addressed.
Finally, it's also worth mentioning that even if Biden wins the presidential race, the occupant of the White House is only one factor in whether a certain policy could become the law of the land. The Senate is one particularly important area to watch -- if the Democrats win a majority in the senate (currently 53-47 in favor of Republicans) -- Biden could have a much easier time implementing his agenda. If not, it could be an uphill battle to tackle Social Security reform during a Biden presidency.
