Social Security is in trouble. You know it. I know it. The program's trustees definitely know it, recently reporting that Social Security will become insolvent one year earlier than previously forecast.
The president is also aware that something needs to be done to preserve Social Security. While his administration hasn't proposed major reforms to Social Security yet, Joe Biden wants to make a big Social Security change based on his previous statements. And there's reason to believe that most Americans could be on board with it.
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Biden's big change
When Biden campaigned for president in 2020, he proposed several benefit increases for Social Security recipients. For example, he wanted to boost the benefits for older Americans who had been retired for at least 20 years. He also sought to increase the minimum benefit, allow surviving spouses to receive higher benefits, and eliminate penalties for public-sector workers.
However, the biggest Social Security change in Biden's plan was to ask "Americans with especially high wages to pay the same taxes on those earnings that middle-class families pay." In particular, he proposed increasing the payroll tax cap to $400,000. This cap is currently $160,200.
Thus far in his presidency, Biden hasn't put forward a plan including this change. He did, though, include a similar idea for Medicare in his proposed 2023 budget. Biden called for a tax increase on all annual earnings above $400,000 to help preserve the federal healthcare program.
What Americans think
A poll conducted by The Associated Press-NORC Center for Public Affairs Research last month appears to show that many Americans agree with the president's ideas. Although this poll didn't specifically ask about raising the Social Security payroll tax cap, the responses to other questions likely made the White House happy.
For example, a whopping 79% of Americans polled oppose reducing Social Security benefits. Three-quarters of those responding were against raising the full retirement age from 67 to 70. This aligns well with Biden's commitments to prevent any cuts to Social Security.
When asked about increasing taxes on households making more than $400,000 to help pay for Medicare, 58% of Americans favored the idea with another 19% on the fence. This doesn't necessarily mean that similar numbers of Americans would favor raising the payroll tax cap to $400,000 to help fund Social Security. However, it seems to bode well for the president's chances to gain public support should he move forward with the proposal.
Another survey conducted by the University of Maryland's Program for Public Consultation (PPC) last year also looked good for Biden. The PPC survey found that 81% of respondents supported the proposal to apply payroll taxes to all income over $400,000 to fund Social Security. Importantly, the idea received bipartisan support, with 79% of Republicans and 88% of Democrats in favor.
More changes needed
At least at this point, increasing the payroll tax cap appears to be one of the most likely reforms to help preserve Social Security's benefits. However, this proposal won't be enough on its own to ensure the program's solvency over the long term.
The Social Security Administration estimates that raising the payroll tax cap to $400,000 beginning in 2024 would eliminate roughly 64% of the projected Social Security shortfall. This projection is close to the PPC's estimate made last year that the change would reduce the program's shortfall by 61%.
The good news for retirees is that there are plenty of other alternatives available that would prevent Social Security from becoming insolvent in 2034. It's also a positive sign that politicians from both major political parties are at least talking about ways to preserve the program.
While consensus hasn't been reached on the best solutions yet, a bipartisan plan to fix Social Security remains a real possibility. In the meantime, the best thing for Americans approaching retirement to do is to save as much as they can and research ways to boost their overall retirement income.
Editor's note: A previous version of this article referenced 2016 as the year of Joe Biden's presidential campaign. The article has been corrected to state that his campaign was in 2020.
