(NewsNation) — Lawmakers have less than a decade to fix Social Security.
Otherwise, millions of Americans will see their benefits slashed, yet both political parties have been reluctant to address the issue.
With President Joe Biden out of the 2024 race, the focus has shifted to Vice President Kamala Harris, and many are wondering what a potential Harris presidency could mean for retirees.
Both Harris and former President Donald Trump have vowed to protect Social Security but have so far offered few specifics on how they would change the program.
As a senator, Harris co-sponsored the Social Security Expansion Act, which would have increased benefits for some and changed how annual cost-of-living adjustments (COLA) are calculated. It also would have required wealthy Americans to pay more into the system.
A major Social Security overhaul would require bipartisan cooperation on Capitol Hill, but here’s what a Harris administration may push for:
Extend payroll tax to the wealthy
The Biden administration has said it will address the solvency issue by asking “the highest-income Americans to pay their fair share.” If Harris takes a similar approach, she’ll likely push for expanding the payroll tax to include higher incomes.
Currently, the primary source of income for Social Security is a dedicated payroll tax, which is capped at $168,600 for 2024 — any income above that isn’t subject to the tax.
Biden’s reform plan suggested expanding the payroll tax to include earnings above $400,000. The legislation Harris co-sponsored in 2019 would have applied the tax to income above $250,000.
Polling suggests eliminating the tax cap would have broad support, with 79% of Republicans and 88% of Democrats in favor of the $400,000 proposal, according to a 2022 survey.
Opponents of the idea argue that getting rid of the taxable maximum could weaken the link between the amount individuals pay in Social Security taxes and the amount they receive in retirement benefits, the Peter G. Peterson Foundation noted in an article. There are also concerns such a change would distort labor supply decisions more than the current payroll tax.
It’s also worth noting that Biden’s 2020 campaign promise to raise taxes on the wealthy hasn’t happened.
Changing the COLA formula
Each year, Social Security benefits are reassessed and adjusted for inflation. The annual calculation often results in a cost-of-living adjustment (COLA), which is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
CPI-W reflects the spending patterns of everyday Americans, but some argue that a different measure would be more accurate for older adults.
Earlier this year, Senate Democrats introduced a bill that would change the way the COLA is calculated so it takes into account the Consumer Price Index for Elderly Consumers (CPI-E). The senators said the CPI-E is more reflective of the actual costs incurred by older adults, in part because medical expenses are weighted more heavily.
Changing the COLA calculation wouldn’t solve the long-term funding issue, but it could lead to a higher annual benefit increase because it usually grows faster than the CPI-W index.
Harris’ 2019 legislation also called for that change, a sign she’s in favor of it.
Raising the primary insurance amount
The primary insurance amount (PIA) is the money a person receives if they start collecting retirement benefits at their normal retirement age. It’s calculated based on a person’s average indexed monthly earnings, which essentially summarize what you made over your career and adjusts for inflation.
If implemented, the Biden-Harris plan from 2020 would have provided a benefit bump up for older beneficiaries. Under that proposal, the benefit would gradually increase between ages 78 and 82, then reach 5% by age 82 and beyond, according to the Penn Wharton Budget Model.
Increased benefits for low earners
Benefits are primarily based on what workers made over their careers, meaning lower lifetime earnings correspond to lower benefits. For those with extremely low earnings, there’s a floor in place called the “special minimum benefit.”
The Biden-Harris 2020 proposal called for an increase to the special minimum benefit of 5% to 50% for long-term low-earners with work histories between 10 and 30 years. The bill Harris co-sponsored in 2019 also called for an increase to the minimum benefit, which would vary depending on how long a person was in the workforce.
In 2019, about 32,000 of the 64 million Social Security recipients qualified for the minimum benefit.