A number of federal programs - including Social Security and veterans programs - index benefits to reflect increases in the cost of living. Also, a number of provisions of the tax code such as the income tax brackets, the standard deduction and personal exemption, and the earned income tax credit and the refundable child credit, are automatically adjusted for inflation. Changing the measure of inflation used by these programs to Chained CPI - which rises more slowly than the current measure - will reduce annual benefits in these programs over time and result in higher taxes, mainly for middle- and lower-income Americans.
SOCIAL SECURITY BENEFIT REDUCTIONS
Overall benefit reductions: $112 billion (See Page 58 of CBO Report )
Projected annual cuts in benefits for a typical retiree (See SSA Chief Actuary Analysis)
* By age 75: $560 a year
* By age 85: $984 a year
* By age 95: $1,400 a year
* NOTE: Average Social Security benefit for a retiree is currently $14,000 a year
TAX INCREASES (See JCT Analysis)
Overall Tax Increases: $59.6 billion
In 2021 alone, individuals’ taxes would increase by $12.5 billion. More than two-thirds (69 percent) of that additional revenue would come from increased taxes on taxpayers with income below $100,000.
* Incomes less than $100,000: $8.6 billion tax increase
* Incomes $100,000 and over: $3.9 billion
The average change in tax liability for all taxpayers would be 0.3%. In general, lower income taxpayers would experience the largest tax increases. In 2021 alone:
* Incomes between $10,000 and $20,000: 14.5% tax increase
* Incomes between $20,000 and $30,000: 3.5%
* Incomes of $1 million and above: 0.1%
CIVILIAN AND MILITARY PENSIONS AND VETERANS BENEFIT REDUCTIONS (See Page 56 of CBO Report )
Overall civilian and military pensions and veterans’ benefits: $24 billion
SSI AND OTHER PROGRAM BENEFIT REDUCTIONS (See CBO Report )
Supplemental Security Income and other programs: $9 billion
MEDICARE AND OTHER HEALTH BENEFITS
* Medicare Providers: A move to chained CPI will lower Medicare provider payment rates for several types of health care providers, including clinical labs, ambulatory surgical centers, durable medical equipment and teaching hospitals via lower payments for direct graduate medical education.
* Eligibility for health programs: A move to chained CPI will reduce eligibility for Medicaid, the Children’s Health Insurance Program (CHIP) and special assistance programs that help low-income Medicare beneficiaries pay for premiums, cost-sharing and prescription drugs. It would also reduce eligibility for health insurance tax credits and other help available under the Affordable Care Act.
* Medicare Beneficiaries: The move to chained CPI would also increase the number of beneficiaries subject to income related premiums for Parts B and D, starting in 2020. The income thresholds for these higher premiums are frozen through 2019. Indexing restarts in 2020 based on the standard CPI, but a move to chained CPI would cause the thresholds to rise more slowly, resulting in more beneficiaries above the thresholds and thus subject to the higher premiums.
* IPAB: A move to chained CPI will lower the allowable cost growth targets for the Independent Payment Advisory Board, potentially resulting in additional Medicare provider cuts.
