Right now, many politicians and pundits are saying we must slash earned benefits to close the Social Security funding gap that is projected to start in 2033. But what you may not know is that one big reason for that upcoming gap is that millionaires are exempt from paying their fair share of Social Security taxes.
That may sound incredible, but it’s true. Someone making just $35,000 a year must, by law, pay a certain fixed percent of their income in Social Security taxes. But millionaires are exempt from that rule. They’re allowed to pay a much smaller percent of their income in Social Security taxes. In fact, the more you earn above $113,700, the smaller percent you have to pay!
The National Committee believes that’s completely wrong — especially when 95 percent of income gains from 2009 to 2012 went to the top 1 percent of the earning population … while America’s median household income dropped by more than $4,000 since 2000, after adjusting for inflation. Read more about why the middle-class is shrinking.
Some describe this as an “earnings cap.” But it’s really a “millionaire’s exemption.” And the truth is, getting rid of this loophole for millionaires and making everyone pay the same percent would go a long way to shoring up Social Security’s finances (which the National Committee believes is a much better solution than cutting earned benefits). Read more about the earnings cap here.
To put it in perspective, chief executives of the nation’s largest companies earned an average of $12.3 million in total pay last year — that’s 354 times more than a typical American worker. Yet, numerous CEOs are putting pressure on Congress to keep tax loopholes for large, profitable corporations while calling for deep cuts to Social Security and Medicare.
There is legislation in Congress right now (S. 567/H.R. 3118) to make that change and remove the “millionaire’s exemption.” But as you might expect, the wealthy have fought that legislation tooth and nail. And so far they’ve won. So the richer you are, the smaller part of your income you have to pay to Social Security.
Some lawmakers have made it clear they intend to protect tax loopholes for millionaires, while forcing seniors and people with disabilities to pay down the federal deficit through cuts to their earned benefits. Yet, Congress doesn’t need to slash Social Security benefits in order to shore up this program — and since it doesn’t contribute one dime to the deficit, Social Security should be kept out of budget negotiations. Bottom line, there is a far simpler, far fairer solution to strengthening Social Security: ask millionaires to chip in their fair share!
That’s why, with the backing of our supporters, the National Committee has launched an aggressive, full-scale campaign on Capitol Hill to pass legislation that would lift the Social Security Payroll Tax Cap — effectively making everyone pay the same percentage of their income into Social Security. Read more commentary on this critical issue here.