Under this new Social Security bill, your taxes could increase dramatically

Social Security has supported the lives of senior individuals for more than 80 years, making it one of the most well-liked and lasting government programmes in American history.

As a result, the poverty rate among seniors is currently just 9%. However, according to analysis, the trust funds that provide Social Security payouts would run out of money by 2034. Democrats have only lately launched a new bill that seeks to increase Social Security at a cost in an effort to prolong the program's stability.

The Social Security Expansion Act was recently submitted to the Senate floor by Senator Bernie Sanders (I-VT), who was joined by over 15 Democratic co-sponsors. The plan suggests raising taxes to further support the ageing U.S. population while aiming to improve benefits and guarantee the Social Security program's long-term viability.

Sponsors of this new legislation desire an overall increase in Social Security benefits of $200 for both new and existing beneficiaries. Given the disproportionate and rising proportion of healthcare and prescription medication costs for the elderly, the bill would also alter the Social Security Cost of Living Adjustment (COLA) formula to give these costs a greater weight. In addition, the plan would amend the Special Minimum Benefit to assist low-income workers, raising it to $17,000 annually for a single worker with a full career or 125 percent of the poverty line, and it would reinstate school benefits for dependents of disabled recipients up to age 22.

However, it's important to understand how the legislation proposes to pay for this expansion: by raising taxes.

The maximum amount of income that can be taxed under the Social Security programme in a given year is now $147,000 in 2022. 6.2 percent, or 12.4 percent divided equally between employers and employees, is the tax rate for wages. All income over $250,000 would be subject to this payroll tax under the Social Security Expansion Act's amendments. According to the bill's proponents, 93 percent of American households would experience no rise, but high incomes would experience a significant change in their net pay.

The proposed legislation would also target investors, business owners, and independent contractors. With a new payroll tax on people making more than $250,000, the self-employed would experience the same tax hike as the salaried. In order to include extra taxes in place of Social Security and Medicare payroll taxes, net investment income taxes would increase from 3.8 percent to 16.4 percent. On business income not already covered by payroll taxes, business owners would also be subject to an additional 12.4% Social Security levy.

High earners may see their taxes rise as a result of a new plan intended to replenish the Social Security fund, which is rapidly running out of money. The annual limit on taxable Social Security earnings is presently $147,000, but this new law may target people making more than $250,000 and subject them to an additional 6.2 percent in payroll taxes. The law also suggests raising taxes on corporations and investors. While millions more senior Americans may benefit from these improvements as they approach retirement, top earners would be particularly affected.