Experts Say the Time Has Come to ‘Smash the Cap’

Social Security is facing a severe funding shortfall. Trust fund reserves are expected to become insolvent in the next 10 years. At that time, benefits would probably be slashed by about 25 percent or more. As CBS News reports, many policy experts say the time has come to “smash the cap.”

They are referring to the Social Security tax cap, which was created after the Great Depression. Currently, the tax cap is $160,200. Any income over that amount is not subject to the payroll tax, which is 6.2 percent paid by the worker and 6.2 percent paid by the employer.

This puts the bulk of the tax burden on low- and middle-income wage earners. Only 6 percent of the population makes more than the tax cap. According to the article, those high-income wage earners are paying taxes on only 1 percent or less of their income. That’s not fair!

Smash the Cap

The Congressional Budget Office (CBO), a nonpartisan federal agency that provides financial analyses of policy issues, calls the Social Security tax cap “regressive” — meaning middle- and low-income workers pay a much greater share of their income toward the program than the rich. 

Smashing the cap would pump more money into the trust fund, helping shore up Social Security. A recent study by the CBO found that eliminating the cap for earnings over $250,000 would keep the Social Security trust fund solvent through 2046.  

Social Security Expansion Act

That is one of the pillars of the Social Security Expansion Act. It calls for lifting the tax cap for people earning $250,000 and adding the Social Security tax to investment and business income, which is currently exempt from the tax. Together, this could extend Social Security for another 75 years.

The Seniors Trust has been calling on Congress to enact this landmark piece of legislation. You can show your support by signing our petition.