The GOP recently announced its proposal to eliminate Social Security’s funding gap with large benefit reductions accompanied by tax cuts on affluent retirees, but with no rise in revenue to the system through tax increases. House Ways and Means Social Security Subcommittee Chairman Sam Johnson, R-Texas, introduced the Social Security Reform Act of 2016, a bill that intends to keep the system solvent for 75 years. Currently, Social Security faces a projected 21 percent across-the-board benefit reduction in 2034 if the system isn’t reformed by legislation.
The Social Security Office of the Actuary projects the proposal would make the Social Security trust fund fully solvent for 75 years, eliminate the current-law unfunded obligation of $11.4 trillion and produce an increase in the funded status of $11.9 trillion. That’s the net result of:
- A $2 trillion decrease in revenue to the system by eliminating income taxes on Social Security benefits of affluent retirees, and
- A $13.9 trillion decrease in the total value of benefits paid, primarily due to changing the benefit formula, reining in cost-of-living adjustments (COLAs) for retirees and increasing the normal retirement age (the age at which people can begin drawing their full Social Security benefits) for workers attaining age 62 in 2023 or later.
The GOP proposals don’t include any revenue increases to shore up the system. In fact, the proposal overshoots the current funding deficit with net benefit cutbacks of 122 percent of the current deficit in order to fund a tax decrease with a present value of 17.5 percent of the deficit.