This Valentine’s Day marks the date when Americans with wages exceeding $1 million stop paying into Social Security for the year. That’s because anyone earning at least that much hits the Social Security payroll tax cap of $128,400, barely seven weeks into 2018. In stark contrast, the average American worker contributes payroll taxes throughout the year.
“This red letter day takes on added significance because of the need to address the long-term solvency of Social Security and a political climate where seniors’ earned benefits are under constant threat,” says Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare.
The payroll tax cap prevents billions of additional dollars from flowing into the Social Security Trust fund, which is projected to be able to pay about 80% of benefits beginning in 2034 if Congress takes no action. While some on the political right have advocated cutting benefits and raising the retirement age to address the shortfall, the National Committee believes that benefits should be boosted and the program’s solvency strengthened by lifting the payroll tax cap – so that millionaires pay their fair share.
Morris Pearl, Chair of the Patriotic Millionaires and former Managing Director at BlackRock, Inc., agrees. “Normal Americans pay social security tax on every cent of income they earn throughout their entire lives, but millionaires like me pay it on just a fraction of our earnings. By raising the cap on payroll taxes, we can guarantee that millionaires pay the same rate as everyone else, and we can ensure that our seniors live and retire in dignity.”
Frank Clemente, Executive Director of Americans for Tax Fairness, says, “Instead of providing massive tax cuts to the richest one percent, we should be making them pay their fair share by scrapping the cap. America is facing a retirement crisis, and by scrapping by the cap, we can ensure fully-funded Social Security benefits for all generations to come.”
Raising the payroll tax cap needn’t be an elusive goal. There is already legislation in Congress to do just that. Senator Bernie Sanders’ Social Security Expansion Act would subject earned income over $250,000 to the Social Security payroll tax. Congressman John Larson’s Social Security 2100 Act would apply the payroll tax to wages above $400,000, then phase out the cap altogether. Both bills would modestly increase Social Security benefits and keep the system solvent for most of this century.
“Perhaps someday – I hope very soon – we will not have to mark this day in mid-February that represents such a gross disparity in what working Americans and the wealthy contribute to Social Security,” says Richtman.
The National Committee, a nonprofit, nonpartisan organization acts in the interests of its membership through advocacy, education, services, grassroots efforts and the leadership of the Board of Directors and professional staff. The work of the National Committee is directed toward developing better-informed citizens and voters.
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