Americans with annual incomes of $1 million or more reached a significant milestone today: anyone with an annual income of that amount or higher has reached the payroll tax cap and has paid all of their Social Security taxes for the year as of February 23.
In an op-ed published on The Hill, Max Richtman of the nonprofit National Committee to Preserve Social Security and Medicare argues that, in light of the program’s precarious financial state, which could result in benefit cuts as early as 2034, it is past time for Congress to raise the wage cap on Social Security taxes, which is currently set at $147,000.
“It is past time for Congress to raise the wage cap on Social Security taxes,” Richtman writes.
When the cap was in place, Richtman argues, “90 percent of wages earned in this country fell below the threshold.” The Social Security payroll tax is currently levied on only 83 percent of such earnings.
The majority of Americans contribute 6.2 percent of their earnings to Social Security. The effective tax rate for the wealthy, on the other hand, is much lower, often as low as.08 percent.”
Congress should enact the Social Security 2100 Act, introduced by Rep. John Larson (D-CT), which would raise the income threshold to $400,000 per year, as Richtman has called for. Approximately 200 people have signed on to support the legislation.
Richtman believes that rather than reducing benefits, legislators should seek to increase them in order to better meet the needs of elders, disabled workers, and their families.
“The most equitable approach to funding such an expansion is to finally ask high earners to contribute their fair amount,” says the author. It is clear that if this wasn’t the obvious path of action prior to the pandemic, it is now.”