Key lawmakers are eyeing a possible year-end tax package as their best shot at offering a fix for a Social Security provision that many on Capitol Hill believe unfairly cuts benefits for public employees who also have government pensions.
The issue was thrust into the spotlight after bipartisan supporters of legislation to permanently boost Social Security payouts by hundreds of dollars a month for nearly 3 million individuals were on the cusp of forcing their bill to the House floor using a special procedural tool.
But House Ways and Means Committee leaders who have been working on their own less expansive compromise plan, one they believe has a better chance of becoming law, turned off the procedural gambit by instead marking the bill up on Sept. 20.
The House’s top tax writers believe they’re close to agreement on addressing the “windfall elimination provision,” which lowers Social Security payouts for individuals who qualify for pensions from their work as teachers, police officers, government employees and other public sector jobs and for Social Security benefits from separate employment.
“I’m convinced the best opportunity to repeal the [windfall elimination provision] and get fairness back to these public servants is to act this year and to focus on the windfall elimination provision,” said House Ways and Means ranking member Rep. Kevin Brady, who’s retiring after this Congress.
The Texas Republican said most of the work is done on getting to a bipartisan fix, which could then become part of a year-end tax package that would ride on an omnibus spending package or another legislative vehicle after November’s midterm elections.
Dylan Peachey, a spokesperson for Ways and Means Chairman Richard E. Neal, D-Mass., confirmed he’s working with Brady on a windfall elimination provision repeal that could move in a year-end package.
A Neal-Brady proposal to scrap the windfall elimination provision would likely avoid significantly accelerating the timeline for when Social Security is expected to become insolvent, and address concerns that seniors who didn’t pay as much into Social Security during their careers might receive unfairly high payouts.
Eliminating the windfall elimination provision would boost benefits for about 2 million individuals and cost about $88 billion through fiscal 2032, according to the Congressional Budget Office. Monthly benefits would increase by an average of $330 starting in December 2023, the CBO said, with monthly payouts rising for a shrinking number of beneficiaries over time.
A second provision that limits Social Security payments for spouses of beneficiaries, or their survivors, who have their own government pensions would cost almost $107 billion to repeal.
If the “government pension offset” were eliminated, benefits would increase by an average $670 a month for 410,000 spouses and by $1,150 a month for 370,000 spouses in December 2023, the CBO said. Average payments would rise steadily over time, with the number of beneficiaries rising initially before declining.
Brady said lawmakers are closer to bipartisan agreement on the windfall elimination provision, which is cheaper to fix and affects more people. He said the model they agree to for addressing that provision could be used later to address the government pension offset.
Senate Finance Chair Ron Wyden, D-Ore., said he’d need to discuss with the panel’s ranking Republican, Sen. Michael D. Crapo of Idaho, the prospects for including a windfall elimination provision fix in a year-end tax bill, but that action is warranted.
“This should have been fixed a long time ago,” Wyden said.
Senate Banking Chairman Sherrod Brown, D-Ohio, has led efforts to repeal the provisions. Brown said he and fellow Democrats have bigger priorities heading into negotiations for a year-end tax bill, namely expanding the child tax credit.
Fixing the windfall elimination provision “is important to a lot of us, but if there’s going to be these gargantuan battles, I don’t know,” Brown said.
Alternative approach
Both Neal and Brady have put forward bills that would scrap the existing windfall elimination provision in favor of what’s known as a proportional formula, which calculates benefits based on all of a worker’s past earnings — in jobs covered by Social Security or other pensions.
That means future retirees would receive Social Security benefits equal to their share of earnings from “covered” employment. If half of earnings came from jobs not covered by Social Security, they would receive benefits equal to 50 percent of what they would receive if all of their earnings had been from employment covered by Social Security.
Both Neal and Brady include “hold harmless” provisions that would allow future beneficiaries to receive the higher of what they would get under current law or under their legislation — although Brady’s bill would eventually transition to solely proportional benefits.
For current retirees, both bills would supplement current benefits for those docked under the windfall elimination provision. Neal’s bill would provide up to $150 a month extra per worker, while Brady’s would add up to $100 monthly per worker plus up to $50 for each dependent.
The Social Security Administration has estimated that both versions would cost less than $30 billion over a decade, although the CBO hasn’t yet weighed in.
Push for repeal
Even as House tax writers believe they’re close to a solution, they’re still facing an effort to force action on a widely backed bill to strike both the windfall elimination provision and government pension offset without replacements or offsets.
Bipartisan supporters of the legislation introduced by Rep. Rodney Davis, R-Ill., crossed the 290 co-sponsor threshold in July to get the measure onto the “consensus calendar,” a tool for bringing popular bills to the floor enshrined in House rules starting with the 116th Congress. As of Friday, the bill had 301 co-sponsors.
But Tuesday’s Ways and Means markup, in which the bill was reported by voice vote “without recommendation,” foreclosed that possibility. It also eliminated the use of a traditional discharge petition for the measure, which requires a majority of House members to sign on in order to bring a bill to the floor that hasn’t been taken up in committee.
Instead, after the Ways and Means markup was scheduled, three GOP supporters — Davis, Garret Graves of Louisiana and Julia Letlow of Louisiana — on Sept. 19 filed a rule to bring their repeal legislation to the floor.
Starting next week, assuming the Rules Committee doesn’t take it up, the rule becomes eligible for a discharge petition to bring it to the floor, which upon adoption would trigger a vote on the underlying bill.
They’ll need backing from a majority of House members to succeed, and with Democrats making up two-thirds of the bill’s supporters, it’s not clear there’d be enough support to directly challenge leadership with a discharge petition.
At a news conference Thursday, Davis said he didn’t know if any Democrats would join the effort.
Connor Joseph, a spokesperson for Virginia Rep. Abigail Spanberger, did not immediately respond to a request for comment. Spanberger is the lead Democratic co-sponsor of Davis’ bill and has pressed for it to go to the House floor in recent weeks.
The windfall elimination provision affects the most residents in some of the largest states, including California, Texas, Florida and Illinois, according to data from the National Active and Retired Federal Employees Association, which represents current and retired federal workers.
In some states — including Brown’s home state of Ohio, Neal’s home state of Massachusetts, and Graves and Letlow’s home state of Louisiana — the provision impacts more than 1 percent of the population.
At a news conference, Davis criticized Ways and Means for taking up the bill. “This is a delay tactic and nothing more,” he said.
He added that concerns about the measure worsening Social Security’s finances should not be a reason for holding up an effort to correct an injustice that deprives public employees of their full benefits.
Ways and Means could have tried to amend the bill to address the cost problem “but they chose not to,” Davis said.
Brady said he believed Ways and Means’ consideration still advanced the issue by showing clear bipartisan support for addressing the windfall elimination provision and the government pension offset.
The markup “was incredibly helpful because it raised the issue that many of us have been working on for literally decades,” Brady said.
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