WASHINGTON (Reuters) - President Barack Obama said on Tuesday that boosting the amount of individual income subject to Social Security taxes should be considered as a way to put the retirement program on a stronger fiscal footing.
The president’s deficit commission late last year proposed raising the income cap on Social Security taxes, now at about $107,000, but Obama has shied away from supporting specific proposals.
Many Republicans criticize the idea as a tax hike.
Neither political party has wanted to touch the government-run program, in part due to its popularity among seniors, a crucial voting bloc. But it is seen as much easier to fix than tackling government-run healthcare programs.
Obama noted that Social Security has not been a driver of budget deficits, though the program will be unable to pay out full benefits to retirees in a few decades. For that reason he said “tweaks” are needed to stabilize the program’s finances.
“For the vast majority of Americans, every dime you earn, you’re paying some in Social Security,” Obama told college students in Virginia. “But for (billionaire investor) Warren Buffett, he stops paying at a little bit over $100,000 and then the next $50 billion he’s not paying a dime in Social Security taxes.”
“If we just made a little bit of an adjustment in terms of the cap on Social Security, that would do a significant amount to stabilize the system,” Obama said.
Social Security, created in 1935 as part of President Franklin Roosevelt’s New Deal reforms, has accumulated huge surpluses for years, which were borrowed by the government to help finance income tax cuts and other programs.
Obama reiterated that Social Security should be tackled separately from broader talks on the deficit.
“Let’s not confuse that with this major budget debate that we’re having about how we deal with both spending and revenues because that is the problem that is going to require some really hard work and some bipartisan cooperation,” he said.
Social Security will pay out more benefits than it collects in taxes this year. It will return to surplus next year and in 2015 start tapping into interest income and trust fund reserves. If Congress does nothing, the trust fund will be exhausted by 2037 and taxes will cover only about 78 percent of benefits.
Raising the income cap “is a progressive solution to the problem,” said Bill Samuel, chief lobbyist at the AFL-CIO labor group. “It is not a severe problem; it can easily be dealt with.”
After hesitating to take hard positions in recent months, Obama last week laid out a strategy to cut the budget deficit by $4 trillion over 12 years, drawing a stark, ideological contrast with a plan pitched by Republican congressman Paul Ryan.
Obama’s blueprint, though, did not back boosting the Social Security income cap, but recommended bipartisan talks to address the program’s long-term challenges.
Meanwhile, a group of senators known as the “Gang of Six” is working on a plan to put the deficit commission’s plan into legislation. That bipartisan panel endorsed raising the amount of income subject to Social Security taxes.
Additional reporting by Donna Smith and Andy Sullivan; Editing by Paul Simao