Photo credit: Got Credit.
Our next presidential election is now less than a year away, with primaries taking place across the country in coming months. There has been a lot of talk from the candidates about topics such as immigration, jobs, terrorism, and Obamacare. Another topic that most have addressed is critical to the financial security of most Americans -- Social Security. (After all, Social Security is the biggest source of income for most older Americans.)
The Center for Retirement Research at Boston College recently released an overview of each candidate's current position on Social Security. A glance at their findings reveals that all three Democratic candidates propose no benefit reductions, while most of the Republican ones do. The Democrats all want to increase revenue for the program, while the Republicans don't. The Democrats propose a variety of ways to boost benefits, while very few Republicans suggest any increases.
Here's a closer look at how many of the candidates have proposed changing Social Security, along with a few explanations of proposals and their possible effects.
Hillary Clinton: Secretary Clinton doesn't support any reductions in benefits. She favors increasing benefits by raising benefits for survivors, and creating a caregiver credit. Because Social Security benefits are calculated based on a worker's 35 highest-earning years, many people, especially women, who have been out of the workforce, or earned very little while caring for children or others for some years, have long received lower benefits because of that. The caregiver credit would give them a credit that would be added into their earnings for benefit-calculation purposes.
Secretary Clinton is also looking to increase revenue for Social Security by lifting the payroll tax cap and broadening the taxation base. You may not realize it, but we're all taxed for Social Security only on our first $118,500 of earnings in 2015 (the cap is adjusted for inflation each year). That means that most of us see all our income taxed, while high earners are only taxed on some of it. Secretary Clinton and others would like to see the cap lifted.
Martin O'Malley: Governor O'Malley is also uninterested in reducing benefits, and in favor of boosting them via a general increase, a bigger minimum benefit, a higher price index for cost-of-living adjustments, and a caregiver credit. He, too, would lift the payroll tax cap in order to increase revenue for the program.
Bernie Sanders: Senator Sanders also doesn't want to reduce benefits, and he would actually boost them via a general increase for all recipients, a further jump in the minimum benefit, and a higher price index for cost-of-living adjustments. Like Secretary Clinton, he would boost revenue for Social Security by lifting the payroll tax cap and broadening the tax base.
Some candidates want to strengthen Social Security, while others favor shrinking it. Image: AFGE, Flickr.
Jeb Bush and Chris Christie: Governors Bush and Christie propose the same suite of benefit reduction tactics: raising the "full" retirement age, raising the earliest age at which you can start receiving benefits (which is now 62), using a lower price index for cost-of-living adjustments, and reducing benefits for higher earners.
Note that the full retirement age has already been increased. It began at age 65 for everyone, and has increased to 67 for those born in 1960 or later. Increasing it further will reduce the strain on the system, but it will also make many Americans work longer, shrinking the length of their retirements.
Jeb Bush is one of only two Republicans willing to increase benefits, supporting raising the minimum benefit. Governor Bush also favors eliminating payroll taxes for older workers and eliminating the Social Security earnings test, which reduces benefits by as much as 50% when retirees collecting benefits also work before their full retirement age. This will leave more money in those worker's pockets; but they would have received the money later anyway, in the form of bigger future benefit checks. Governor Christie favors eliminating payroll taxes for older workers.
Ben Carson: Dr. Carson would like to increase the full retirement age. He has also proposed letting workers invest a chunk of their payroll taxes in a personal account. The argument for that is that they might end up with more money -- but they might also end up with less -- and the plan gives more business to financial services companies.
Ted Cruz: Senator Cruz would also raise the full retirement age, and favors general reduction of benefits, too. He would achieve the latter by taking wage growth out of the calculation of initial benefits, leaving it influenced only by inflation, which is assumed to have a slower growth rate than wages. He has also proposed letting workers invest a chunk of their payroll taxes in a personal account.
Mike Huckabee: Governor Huckabee has proposed widespread tax reforms, which include eliminating Social Security payroll taxes, and instituting a new consumption tax. He would fund Social Security through some of the revenue from the consumption tax.
John Kasich: Governor Kasich supports reducing benefits for higher earners.
Rand Paul: Senator Paul favors raising the full retirement age and reducing benefits for higher earners. He also has proposed widespread tax reform, eliminating Social Security payroll taxes, and instituting a new business tax through which he would fund Social Security.
Marco Rubio: Senator Rubio favors raising the full retirement age, reducing benefits for higher earners, eliminating payroll taxes for older workers, and eliminating the Social Security earnings test.
Carly Fiorina, Jim Gilmore, Rick Santorum, and Donald Trump: These candidates may have made some Social Security proposals in the past, but they are not currently suggesting any significant changes to the Social Security program.
Of course, candidates and their positions have been known to change from time to time. If this topic interests you, keep tabs on what the candidates propose next.
