(CNN)Sen. Elizabeth Warren on Thursday unveiled a proposal to overhaul and expand Social Security, beefing up benefits with a hike in payroll and investment incomes taxes on some of the country’s wealthiest households.
The Massachusetts Democrat’s plan would make major changes to the popular entitlement program, which currently provides monthly payments to roughly 64 million Americans.Most significantly, it would immediately boost benefits by $200 a month for every Social Security recipient. If the plan were implemented next year, the typical beneficiary would receive $1,595 a month, rather than $1,395. It would also increase monthly payments by $200 for certain Supplemental Security Income recipients, who are low-income seniors or people with disabilities.The plan fits into the presidential candidate’s broader message demanding “big, structural change” to large parts of the American economy and would take significant steps in an attempt to address a legacy of inequality that, she said in a Medium post, has hit older women and people of color the hardest. By supplementing and growing the program, Warren is also making another play to increase her support among older voters — the Americans who most reliably go to the polls on election days. The plan arrives just hours before Thursday night’s Democratic presidential debate in Houston, which could spur more in-depth discussions before a national audience.Read MoreWarren’s proposal does more than simply offer more generous benefits. It also fundamentally changes how Social Security is funded, a move that — while drastically broadening its scope — could stoke opposition among the highest earners, who under the rewritten formula would have to pay much more into the system than they are paid out. As part of her vision for guaranteeing benefits that come closer to matching the costs often incurred by older Americans, Warren — like Sen. Bernie Sanders of Vermont — would change the inflation measure used to calculate the program’s annual cost-of-living adjustment. She would shift it to one that focuses more directly on the elderly, taking into account that seniors spend more on health care, the cost of which typically rises more than other goods and services.The two Democratic candidates’ proposals are the most significant effort to reshape Social Security since former President George W. Bush tried to introduce private investment accounts into the system in 2005.Warren’s plan calls for ending two provisions — the Windfall Elimination Provision and Government Pension Offset — that reduce Social Security benefits for many former state and local workers with pensions and their families. This measure would increase benefits for more than 2 million former public-sector workers and their families.”A generation of stagnant wages and rising costs for basics like housing, health care, education, and child care have squeezed family budgets,” Warren wrote. “Millions of families have had to sacrifice saving for retirement just to make ends meet. At the same time, fewer people have access to the kind of pensions that used to help fund a comfortable retirement.”Bernie Sanders wants to save Social Security by raising taxes on people making more than $250,000 The plan would augment payments to surviving spouses in two-earner households, children who are full-time students — up to age 24 — with a parent who has disabilities or has died, and widows and widowers with disabilities.Additionally, it would provide credits to caregivers and those in job-training programs, which would increase their average lifetime earnings used to calculate their Social Security benefits. Warren argues that the caregiver credit will particularly help lower-income women, people of color and recent immigrants.”For every month of caregiving that meets these requirements, the caregiver will be credited for Social Security purposes with a month of income equal to the monthly average of that year’s median annual wage,” Warren wrote. Those credits would be unlimited and people “can claim these credits retroactively if they have done this kind of caregiving work in the last five years.”Warren’s blueprint got a stamp of approval from the advocacy group Social Security Works, which lauded its potential effects on current and future recipients.”She knows that caregivers — disproportionately women — who take time out of the workforce to care for loved ones provide invaluable work for their families and the nation,” Nancy Altman, the president of Social Security Works, said in a statement. “Her plan gives those family caregivers credit towards their future Social Security benefits, so that those who perform this essential work will have the secure retirements they have earned.”To pay for it all, Warren once again turns to the wealthy.She would impose a 14.8% payroll tax on wages above $250,000, split between employees and employers. This would affect less than the top 2% of earners, she says. Sanders’ Social Security plan would target the same earners but raises the tax rate slightly less, to 12.4%, also split between workers and their employers. His legislation would increase benefits for all recipients, with low-income seniors receiving a boost of nearly $1,300 a year.That is the rate currently levied on the first $132,900 of wages, with workers and their employers each paying 6.2%.Plus, Warren would create a new 14.8% tax on a portion of investment income for individuals making more than $250,000 or families making more than $400,000 a year. Sanders’ plan, which he rolled out earlier this year, would impose a new 6.2% tax on single people with investment income above $200,000 and couples taking in more than $250,000.Overall, Warren’s plan would extend the solvency of the Social Security trust fund to 2054, or nearly 20 more years, according to an analysis by Mark Zandi, chief economist at Moody’s Analytics. Currently, the Social Security Administration’s actuaries predict that the program’s trust fund will not have enough money to pay full benefits by 2035. The Sanders bill would add about 35 years to that projection.Zandi found that Warren’s improvements in benefits would lift an estimated 4.9 million elderly people out of poverty and would increase the average Social Security benefit for those in the bottom half of the income distribution by nearly 25%. Those in the top 10% of earners would see payments edge up by less than 5%.Meanwhile, the top 1% of earners would be hit with about $150,000 more in payroll taxes annually, and those in the next 1% would pay just over $10,000 more a year, Zandi said.However, Zandi warns, a number of Warren’s economic policy proposals — including affordable housing, student lending and child care — are also financed by raising taxes on the rich. This could prompt them to make changes that could lower the amount of revenue the proposals raise.