Why Lifting the Wage Cap Could Save Social Security

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It’s no secret that Social Security’s reserves are dwindling. Predictions are the Trust Fund could be depleted in about 10 years. Politicians and experts have tossed around a lot of ideas on how to shore things up with many, including The Seniors Trust, calling for the Social Security payroll tax cap to be lifted. A recent opinion piece by Max Richtman for The Hill makes a really good case for that.

In “Make This The Last Year That Millionaires Stop Paying Into Social Security Before The Rest Of Us,” Richtman says the system is fundamentally unfair. He believes the wealthy need to pay their fair share.

Workers Bear the Burden

Most working Americans pay 6.2 percent of their wages into Social Security. But Richtman discovered that the effective tax rate for the wealthy is significantly lower, sometimes less than 1 percent. That means the burden of Social Security taxes falls more heavily on lower wage earners.

He points out that these lower wage workers will receive proportionately higher Social Security benefits, but they are also the ones who need the retirement income the most. Making matters worse, if nothing is done to replenish Social Security Trust Funds, beneficiaries face a 22 percent cut in benefits. That’s frightening for a population who are already facing record inflation and are struggling to make ends meet.

Raise the Cap

Richtman believes the wealthy can afford to pay their fair share into Social Security — and should. He also points out that numerous polls show the majority of Americans favor eliminating the payroll wage cap. He cites a recent survey by the National Committee to Preserve Social Security and Medicare, which found that 96 percent of members and supporters questioned support raising the cap.

Calling on Congress

Hope is on the horizon. There are viable bills in Congress that would lift the wage cap as a means of supporting Social Security. The Social Security 2100 Act: A Sacred Trust is one option. That bill would adjust the cap so that annual wages exceeding $400,000 per year would be subject to Social Security payroll taxes, thereby putting more weight on the wealthy.

The Seniors Trust believes the Social Security Expansion Act is a better option. Not only would the Social Security Expansion Act raise the payroll wage cap, ensuring the wealthy pay their fair share, but it will increase benefits by about $65 each month for most retirees, provide a more realistic cost-of-living adjustment (COLA) by using the Consumer Price Index for the Elderly (CPI-E) instead of the Consumer Price Index for Urban Wage Earners (CPI-W) used currently because the CPI-E takes into account the unique spending habits of seniors, and guarantee the long-term solvency of the Social Security program.

To show your support for the Social Security Expansion Act, please sign our petition to Congress.