Millionaires stop paying into Social Security for the year on March 1st — and billionaires already stopped contributing wages to the program in January.  The rest of us continue paying into the system for the entire year.  Is it fair that Elon Musk, Rupert Murdoch, Charles Koch, and Tim Cook of Apple don’t have to contribute to Social Security for the rest of the year while most Americans do?  We don’t think so. Our Social Security expert, Maria Freese, explains why we need to scrap — or adjust — the payroll wage cap. 

Q: For those who don’t know, what is the Social Security “payroll wage cap?”

FREESE:  Most people have no idea that there’s a limit on how much of your wages are subject to Social Security payroll taxes because they don’t make enough money to ever reach the cap. This year the cap is $168,600. Once you reach that amount in wages, you stop paying into Social Security for the rest of the year.

Q:  So the slogan is: “Scrap the Cap” and we support adjusting the payroll wage cap. Why? Why do we support that?

FREESE: High-income earners pay a significantly smaller percentage of their wages into Social Security than the rest of us. That’s not only patently unfair; it deprives Social Security of much-needed revenue, and we believe that the best way to infuse new revenue into Social Security is to ask the wealthiest among us to pay their fair share.

Q: In years past, 90% of wages in this country fell below the cap, so that income was captured. Today, only about 83% of those earnings are subject to the Social Security payroll tax. That’s because of widening wealth inequality, correct?

FREESE: While middle-income workers’ wages have been stagnating for the last couple of decades, the earnings of the highest paid workers in the country have continued to grow disproportionately. This imbalance means that more and more of the income earned by the wealthy is exempt from paying into Social Security, while workers who are already suffering because their wages haven’t kept up with the cost of living over the past decades they continue contributing on every dollar they earn.

Q:  Senator Bernie Sanders and Representative John Larson have offered legislation that would adjust the payroll wage cap, which would go a long way toward keeping the Social Security trust fund solvent beyond its projected depletion date in 2034. Tell us more about how these bills would do that.

FREESE: Both bills ask the wealthiest among us to pay their fair share. They just start at different thresholds. The bill by Senator Sanders reinstates Social Security payroll taxes for wages over $250,000 a year. The bill by Congressman Larson, on the other hand, begins the Social Security payroll taxes again for those earning over $400,000 a year. They did that intentionally, so that it would line up with President Biden’s commitment not to raise taxes on anyone earning under $400,000.

In addition to raising the wage cap, they also both impose a tax on investment income for the wealthiest, who, more and more, are living on the income produced by stocks and bonds rather than wages.

Q: In return for the wealthy contributing more, which they would under this legislation, they would get a higher benefit? Is that right?

FREESE:  We believe they should, and in Congressman Larson’s bill, they do. Social security is an earned benefit. The taxes we contribute have a direct relationship to the amount of benefits we earn. For those who earn the least over their lifetimes, Social Security provides a higher proportionate benefit either in retirement or in case of disability — as a percentage of what they earned while they were working.

Q: We’re calling on President Biden to include in his next fiscal year budget a proposal for Social Security that would have people earning more than $400,000 per year contribute to the program and not hit a cap. And that would be in keeping with his pledge that you mentioned earlier, not to raise taxes on anyone making less than that, right?

FREESE:  That’s exactly right. And in fact, as I mentioned earlier, the bill by Congressman Larson does exactly that. It does not affect taxes paid by anyone earning under $400,000 a year. And that was done intentionally to align the proposal with the president’s commitment not to raise taxes for anyone earning under that amount.

Q: If the Republicans oppose bringing in new revenue to Social Security by having the wealthy contribute a little more, what do the Republicans propose instead?

FREESE:  That’s actually a very good question. Republicans have generally been unwilling to put any of their proposals on paper for obvious reasons. Cutting Social Security is extremely unpopular, and they don’t want voters to see how they would cut benefits. So instead, they’ve resorted to calling for a so-called fiscal commission that would design a reform proposal that would then be fast-tracked through Congress before the public could even find out what was in it. That way, they hope to avoid political accountability for cutting the country’s most successful and popular program.

So we don’t really know what they would propose. They hope that they can sneak through significant benefit cuts and probably not do a whole lot of revenue raising — if they use this configuration of a fiscal commission to do their dirty work for them, basically.

Q:  A recent survey that we did of our members and supporters indicates 96% support for raising the payroll wage cap. So I ask you again, if this is so popular, why hasn’t it been done?

FREESE:  Republicans don’t support and have not supported in the past any proposals to raise taxes on their wealthy contributors or on corporations. So you can’t get any Republican support. You couldn’t get a bill through the Senate. It would be hard enough to get it through the House, but you certainly couldn’t get it through the Senate.

Q: We have been beating this drum for many years now about adjusting the payroll wage cap. What do you think the likelihood is of this happening anytime soon?

FREESE: It’s really hard to get members of Congress to agree on anything unless they’re faced with a deadline or a crisis. And even then, it’s not easy to find consensus these days. Social Security doesn’t face that deadline until the trust funds become insolvent, which currently, as you mentioned, is projected to happen in the mid 2030s. It would be better for everyone if they were able to do it sooner rather than later, but Congress just doesn’t tend to work that way.