By Eileen Kirlin, Executive Vice President, SEIU
With the ongoing government shutdown, it’s almost easy to forget that our senior population faces another equally severe threat from Congress. Let’s hope that when the government shutdown finally ends, Congress does not reduce the monthly income of at least 37 million Americans as a result of some “grand bargain” that includes moving Social Security’s cost-of-living adjustments to a chained CPI (C-CPI-U) measure of inflation.
This week, hundreds of Americans will join the Alliance for Retired Americans and Social Security Works human chain on Capitol Hill in hopes of raising awareness of chained CPI. This has been promoted as a simple, cost-saving adjustment, but it’s actually a huge deal.
If we look beyond the smoke and mirrors rhetoric, here are a few facts everyone should know about chained CPI:
It’s an adjustment alright ...
The chained CPI will be an immediate budget adjustment for seniors receiving Social Security’s retirement benefits. This adjustment, which slows down the rate of Social Security planned increases, will result in immediate, real benefit cuts. These aren’t small cuts either. An average worker retiring in 2011 at age 65 would lose more than $6,000 over 15 years if the chained CPI were enacted, according to Social Security Works.
It’s a tax hike for everyone except the wealthy
Research from the Center for Economic and Policy Research shows the chained CPI would raise taxes on virtually all working Americans, especially middle- and lower-income families. That’s because this formula would essentially lead to workers’ incomes moving into a higher tax bracket at a faster rate.
According to Congress’ Joint Committee on Taxation, if individual income taxes were indexed to the chained CPI starting this year, by 2021, nearly 70 percent of America’s gains in revenue would come from taxpayers making below $100,000. But our wealthiest 1% would barely be affected at all, contradicting the idea that the negative effects from benefit cuts due to a switch to the chained CPI would be offset by increased revenue from the wealthy.
It’s a cut that most Americans don’t want
A recent survey from the National Academy of Social Insurance reveals that when given a choice, 77 percent of Americans would rather raise Social Security taxes on some or all Americans instead of cutting benefits. In stark contrast to chained CPI, Americans would prefer to base Social Security’s annual cost-of-living adjustment on inflation that seniors actually experience. This change would increase Social Security benefits at a slightly faster rate than the current measure.
Side note: Shouldn’t lawmakers listen if nearly 90 percent want to preserve Social Security for future generations even if it means increasing the taxes paid by wealthy Americans?
It doesn’t have to happen
Would you believe me if I told you we don’t have to implement the chained CPI to reduce deficit spending? First of all, the federal government doesn’t fund Social Security, taxpayers do. Social Security is directly funded directly by payroll contributions divided between workers and their employers. Secondly, there are a number of ways Washington, D.C., lawmakers can reduce the debt, including closing corporate tax loopholes. According to a 2007 Treasury Department report “corporate tax preferences” or loopholes cost our government $1.24 trillion over a ten-year period.
We could also strengthen Social Security for today’s retirees and future workers by closing another loophole enjoyed by our wealthiest citizens. Americans only pay Social Security taxes on their first $113,800 of wages each year. Workers who earn more than that and investors who earn money from dividends and capital gains don’t pay Social Security taxes on their additional income. In other words, the wealthy 1% pays less than 2 percent of their income in Social Security while the 99% pays 6.2 percent. If everyone paid their fair share, we could protect our most vulnerable seniors from drastic cuts to Social Security as well as ensure the program’s solvency for the future.
Sure, these measures may not get the headlines that a government shutdown does, but shouldn’t every American have an opportunity for a dignified retirement after a lifetime of hard work and playing by the rules?