Now that Vice President Kamala Harris has secured the support of enough Democratic delegates to become her party’s nominee in the wake of President Joe Biden’s bombshell Sunday announcement that he will not seek reelection, it’s time to examine what is known about her position regarding Social Security and retirement.
While any specific new policy points from Harris are not currently available—understandable given the suddenness of her candidacy—the expectation is that Harris will take much the same line as Biden when it comes to Social Security.
Under the leadership of Biden, Harris has endorsed the current administration’s plans for funding the Social Security Administration, including enacting additional taxes on wealthy individuals with incomes of more than $400,000 to help extend Social Security’s solvency. Currently, up to $168,600 in earnings are subject to Social Security payroll taxes.
Information from the 2024 Social Security Trustees Report released earlier this year projects that Social Security’s combined trust funds will be able to pay full benefits until 2035, at which point only 83% of benefits will be payable absent action in the interim from the federal government. And the fund Social Security relies on to pay retirement benefits is due to run out sooner, in 2033, when 79% of those benefits will be payable.
That dwindling timeline builds urgency for addressing Social Security’s solvency issues, which have long been put on the back burner by politicians unwilling to risk upsetting voters by making moves that would cut benefits and/or raise taxes to extend the program’s solvency.
A new research brief from the National Institute on Retirement Security (NIRS) finds Americans want action now on a long-term funding solution for Social Security. When asked about the timing for Congress to act on addressing Social Security’s funding shortfall, 87% say Congress should act now rather than waiting another 10 years to find a solution. This sentiment holds strong across gender, age, and party affiliation.
So if Harris were to win the election and become the 47th President of the United States, what might it mean for Social Security—a program that represents about 30% of the income for Americans over age 65?
While she may very well speak or release a stance with more specifics about Social Security in the coming days or weeks, what’s out there already gives a pretty good indication of the direction a Harris Administration might take. Here are two of the potentially most impactful changes she is likely to push:
1. Tax income over $400,000
With Social Security’s Old Age and Survivors Insurance (OASI) Trust Fund expected to run short of money within the next decade, leaving Social Security beneficiaries solely dependent on the program’s payroll taxes that currently cover about 77% of benefits. That would reduce the average annual benefit by around $6,000—or $500 a month. One idea that has been floated by the Biden-Harris Administration to extend the program’s solvency is to tax earned income above $400,000. That would still leave wages between $168,600 and $400,000 untaxed. In 2024, any wages above $168,600 are not taxed for Social Security.
Harris has supported this plan as Vice President, and previously, when she was a senator in California, Harris also backed proposed legislation called the Social Security Expansion Act, a bill last introduced in Congress in February 2023 by Sen. Bernie Sanders (I-VT). That bill would actually expand Social Security benefits by $2,400 a year and ensure Social Security is fully funded for the next 75 years by subjecting all income above $250,000 to the Social Security payroll tax.
But that plan conflicts with the Biden-Harris Administration’s oft-repeated pledge not to raise taxes for anyone making less than $400,000, meaning she would likely not support the $250,000 threshold in favor of the $400,000 threshold.
Harris would more likely support recent Democratic proposals including Rep. John Larson’s (D-CT) Social Security 2100 Act and Sen. Sheldon Whitehouse’s (D-RI) Medicare and Social Security Fair Share Act, which both would require taxpayers who earn more than $400,000 to contribute to Social Security with earnings above that amount.
2. Switch the COLA formula
There has been plenty of talk in recent years about changing the way the annual Social Security cost-of-living adjustments (COLA) are calculated, and it wouldn’t be a stretch to see a Harris Administration staying behind this.
Since 1975, the COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The Biden-Harris Administration has expressed a preference for switching to the Consumer Price Index for the Elderly (CPI-E), which supporters say does a better job of tracking actual expenses of seniors, including increased spending on healthcare.
Failing to adequately protect Social Security benefits from the effects of inflation can lead to a loss of buying power in benefits over time and lower growth in Social Security benefit income throughout retirement. A 2023 survey by The Senior Citizens League found 8 in 10 retirees think the Social Security COLA should be tied to an index that more closely reflects inflation experienced by seniors. According to annual research by TSCL released in 2023, Social Security benefits have lost about 36% of buying power since 2000.
TSCL said last year that if the CPI-E was used instead of CPI-W to calculate the Social Security COLA, the 2024 increase would have been 4% instead of the 3.2% raise beneficiaries received for 2024.
The CPI-E tends to rise more quickly than the CPI-W in most years, but there are notable exceptions, such as in 2021 and 2022, when gasoline prices soared. The Social Security 2100 Act, legislation first introduced in the House by Representative John Larson (D-CT) in 2021, would change how the COLA is determined by requiring the higher of the CPI-W or the CPI-E to be used in calculating the COLA.
SEE ALSO:
• Vetting VP Contender Kamala Harris’ Views on Retirement
• Trump and Biden: What the Candidates Say About Social Security
• Biden Floats Billionaire Tax, Vows to ‘Protect’ Social Security
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.