Social Security Reform: Higher COLA and Tax Changes for High Earners
This Act introduces significant changes to the Social Security program, primarily by adopting a new inflation measure (CPI-E) tailored to the spending habits of seniors, which is expected to result in higher annual cost-of-living adjustments (COLA). Additionally, a portion of high incomes exceeding the current contribution cap will be temporarily subject to Social Security taxes, and these surplus earnings will be partially included in future benefit calculations.
Key points
Annual cost-of-living adjustments (COLA) will be calculated using the Consumer Price Index for Elderly Consumers (CPI-E), likely leading to larger yearly benefit increases for retirees.
Between 2025 and 2030, a percentage of earnings above the current Social Security tax cap will be subject to taxation, affecting high-income earners.
These newly taxed surplus earnings will be partially included in the formula used to calculate future Social Security benefits, potentially increasing payments for high earners.
Benefit increases resulting from the new COLA calculation will not count against eligibility for Supplemental Security Income (SSI) or Medicaid.
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