There has been much talk and speculation that Social Security is going broke. Although that is not true, there is cause for concern regarding the long-term solvency of the program. Much of the reason is due to the fact that Social Security’s primary source of funding is payroll taxes and with the bulk of the Baby Boomer generation reaching retirement age — the so-called “Silver Tsunami” — the system will soon be doling out more in benefits than it’s taking in through payroll taxes. The solution seems simple enough — raise Social Security taxes.

But the problem is, it’s not that simple.

Let’s begin by looking at how the Social Security payroll tax is collected. All workers are required to pay a 12.4 percent Social Security tax on their earnings up to the annual wage cap limit — this year that’s $168,600. If you work for someone else, that’s split between you and your employer with each paying 6.2 percent. However, if you’re self-employed, then you have to pay the full 12.4 percent yourself. The important thing to keep in mind is that taxes are only collected on income up to $168,600 — anything above that is not taxed.

Scrap the Cap

Many people believe this is not fair and, in fact, they claim the system is set up to benefit higher wage earners. That’s because a person earning $168,600 pays the same amount in taxes as someone making $500,000 or $5 million. A more equitable way to beef up the Social Security trust fund would be to lift the wage cap, rather than raise taxes.

It’s actually one of the tenets of The Social Security Expansion Act. This landmark piece of legislation calls for lifting the cap on Social Security taxes and subject all income above $250,000 to the Social Security payroll tax. This would ensure that the wealthiest Americans pay a fairer amount in relation to their income.

The bill’s sponsors say doing so would extend the solvency of Social Security for at least another 50 years. A study by the Center for Economic and Policy Research supports the theory that by lifting the wage cap we could strengthen the long-term solvency of Social Security.

In addition to strengthening the Social Security program, the Social Security Expansion Act also calls for increased monthly benefits for seniors and enacting an annual cost-of-living adjustment that is fairer to seniors and their unique spending habits.

Change Is Needed

The Seniors Trust is working to pass The Social Security Expansion Act. Please, sign our petition to Congress and join us as we strive to improve the lives of senior citizens.