Elizabeth Warren released a plan Thursday to expand Social Security and raise benefit payments.
Warren’s plan would:
- Immediately increase benefit payments by $200 a month. If enacted, Warren’s plan would raise the average monthly Social Security benefits from $1,395 to $1,595 in 2020, according to an analysis by Moody’s economist Mark Zandi.
- Change the way annual cost-of-living increases are calculated to use a measure of inflation that focuses on seniors and they costs they face, including health care.
- Provide Social Security credit to people in job-training programs and those who leave the workforce to care for family members.
- End current provisions that reduce benefits for many former state and local public employees with pensions.
Warren’s plan would cost $150 billion in its first year. To pay for it, she proposes raising taxes on upper-income households, including:
- A new 14.8% payroll tax on annual earnings over $250,000. Currently, only earnings up to $132,900 are subject to a 12.4% payroll tax. Under Warren’s plan, the cap would continue to rise, reaching the $250,000 level by 2037, eliminating the gap.
- A 14.8% tax on investment income in wealthy households, with a threshold of $250,000 for single filers and $400,000 for married joint filers.
- A broader definition of investment income that is subject to payroll tax.
- The application of payroll taxes to pass-through business owners.
The Warren campaign estimated that those new taxes would result in a $1.1 trillion reduction in the federal deficit over a decade, based on the analysis by Moody’s Analytics. The revenue increases would help stabilize the Social Security system’s finances, keeping the program’s trust fund solvent until 2054, according to the analysis.
Why it matters: It’s a shrewd political move to court older voters who polls show are more likely to favor Joe Biden. More importantly, perhaps, Warren’s plan reinforces a major change in approach toward Social Security among Democrats in recent years. “Warren’s proposal is the latest sign that Democrats have shifted from promising to protect Social Security benefits — or in the case of former President Barack Obama, proposing to slow the rate at which benefits increase over time — to expanding the program and increasing benefits,” Alan Rappeport and Jim Tankersley of The New York Times said.
Moody’s Zandi said that while there is considerable uncertainty around the proposal given the complexity of the issue, Warren’s plan would “put the system on much sounder financial ground, extending its solvency by almost 20 years into the middle of this century” and create “a much more progressive Social Security system” that would lift nearly 5 million elderly Americans out of poverty.
However, by asking the rich to pay much more, the plan may run the risk of weakening political support for the country’s most important poverty reduction program, Zandi said.