I have often heard that suggestion in conversations, but never see it as a possible solution. Why not? It sounds logical to me considering how much more money is available.
When social security was started, it was sold and set up to be kind of a savings program. You put money in through your taxes and you received a benefit amount tied to your taxable earnings. The benefits are capped for wealthy people, which is why there's a cap on the taxes.
The issue is, the government has spent the money in the SS trust many times on things that aren't SS related, so even the original theory is out the window. But basically, the argument is that if you removed the cap on the tax, you'd just end up paying out more to the people who are paying more tax.
Basically, people would need to view it as a social program tied to everyone instead of an individual account.
years ago we went thru this with our defined pension plan at work... top executives could only get $X in pension benefits so we split the plan and the rest of the salary went in plan 2 so they could be totally compensated. And then the levels were lifted and I was stuck with two plans to prepare for the audit.
While I think that's the major part of a comprehensive solution, making it happen will be politically difficult, especially in a Republican House. Why? Because it impacts significantly the petit-bourgeois (e.g., small business owners, managers, car dealers, realtors, etc.) who are reliable funders of MoC campaigns. The longstanding argument in favor of the FICA limit is that post-retirement benefits are capped, so pre-retirement payments must also be capped. But that was based on an assumption of an expanding active workforce, not a shrinking one. I'm very pessimistic about Congress doing anything responsible and effective in the long run. The can will be kicked until it bounces off a wall, back into their faces, and the problem has become more-than-critical.
We’re talking about the payroll wage “cap” on the maximum amount of earnings subject to the Social Security payroll tax - not a cap on Social Security benefits!
That payroll wage “cap” has been increased many times over the years. Last year the “cap” was $147,000. This year it’s $160,200. Why not just eliminate the cap? As Joe Meek has written above, that would fund SS for another 35 years.
There’s no cap on the Medicare contribution deducted from your income.
Because they still want to maintain the pretense that the payments one will receive from Social Security are just the return of one's own accumulated withholding, with interest. Since there is a cap on how much one can receive in SS payments, there should be a cap on withholding, as well. For some reason, they don't want to puncture that dearly held illusion.
If nothing else, they could raise the cap, even if they won't eliminate it.
Yes. But look at people with 2 kids who make $140K yes a good living in most parts of country. comfortable. Is there justice in sticking it to them as they get a promotion to $160? They are saving for college. Saving for retirement. Saving for home repairs. Not building a yacht. The burden is always at the lower end. Why not take a break until $400K then start applying again.
No one is being punished if they get a raise to above the cap, they are just paying the same tax rate as everyone else. It's called fairness. Why should a promotion/raise also come with a tax cut? Makes no sense, unless you embrace a regressive tax system, where the poor should pay a higher percentage of their income for taxes than those who make more.
The poor already pay the higher costs. The current 'limit' is set at 160K. Let's just keep that. But not expand it. Expand it from 400K up. There. Solved your little complaint re 'tax cuts for the rich'. No one currently paying would get a tax cut. There would only be 'new' revenue.
Note that you're putting words in my mouth. I never wrote about a little complaint re "tax cuts for the rich". Based on your original comment--about sticking it to people that get a promotion--and this misrepresentation, it's clear that I'm just talking to your hand and you'll only consider the merits of your argument.
Politicians love plans like you suggest here because who would not love a payroll tax cut.
I think the relatively small percentage taken for Medicare (1.45%) and Social Security (6.2%) would not put much of a burden on anyone--- especially considering that they will eventually benefit far more than they ever put into the system. Social Security is, and will remain, the foundation of most peoples retirement income. They should pay especially during periods where other economic priorities will impact how much they can voluntarily save/invest for retirement.
Also it would be great if all "Unearned Income" from investments, stock options, etc. were taxed at 2.9% for Medicare and 12.4% for Social Security, in addition to regular income taxes, with no cap.
The side benefit to such a scheme is that it would reduce the percentages required to support the system for every one from the minimum wage worker (and the employer who pays an equal share into the system) up to the richest billionaire.
Well. If the max is now 160K for taxable purposes. Then yes, you cut the 140-160 out and start again at 400. Which would be a tax increase for all incomes above 400. If you get more revenue that way then it is a tax increase not a tax cut.
Getting rid of the income cap on Socials Security would keep it funded for an additional 35 years
I have often heard that suggestion in conversations, but never see it as a possible solution. Why not? It sounds logical to me considering how much more money is available.
When social security was started, it was sold and set up to be kind of a savings program. You put money in through your taxes and you received a benefit amount tied to your taxable earnings. The benefits are capped for wealthy people, which is why there's a cap on the taxes.
The issue is, the government has spent the money in the SS trust many times on things that aren't SS related, so even the original theory is out the window. But basically, the argument is that if you removed the cap on the tax, you'd just end up paying out more to the people who are paying more tax.
Basically, people would need to view it as a social program tied to everyone instead of an individual account.
It can be funded the same way the military is funded. Why don’t people matter as much as military power? Priorities.
years ago we went thru this with our defined pension plan at work... top executives could only get $X in pension benefits so we split the plan and the rest of the salary went in plan 2 so they could be totally compensated. And then the levels were lifted and I was stuck with two plans to prepare for the audit.
While I think that's the major part of a comprehensive solution, making it happen will be politically difficult, especially in a Republican House. Why? Because it impacts significantly the petit-bourgeois (e.g., small business owners, managers, car dealers, realtors, etc.) who are reliable funders of MoC campaigns. The longstanding argument in favor of the FICA limit is that post-retirement benefits are capped, so pre-retirement payments must also be capped. But that was based on an assumption of an expanding active workforce, not a shrinking one. I'm very pessimistic about Congress doing anything responsible and effective in the long run. The can will be kicked until it bounces off a wall, back into their faces, and the problem has become more-than-critical.
Bingo! There's no cap on the Medicare deduction from your paycheck. Why should there be a cap for Social Security.
Because there's a cap on social security benefits.
We’re talking about the payroll wage “cap” on the maximum amount of earnings subject to the Social Security payroll tax - not a cap on Social Security benefits!
That payroll wage “cap” has been increased many times over the years. Last year the “cap” was $147,000. This year it’s $160,200. Why not just eliminate the cap? As Joe Meek has written above, that would fund SS for another 35 years.
There’s no cap on the Medicare contribution deducted from your income.
Because they still want to maintain the pretense that the payments one will receive from Social Security are just the return of one's own accumulated withholding, with interest. Since there is a cap on how much one can receive in SS payments, there should be a cap on withholding, as well. For some reason, they don't want to puncture that dearly held illusion.
If nothing else, they could raise the cap, even if they won't eliminate it.
Yes. But look at people with 2 kids who make $140K yes a good living in most parts of country. comfortable. Is there justice in sticking it to them as they get a promotion to $160? They are saving for college. Saving for retirement. Saving for home repairs. Not building a yacht. The burden is always at the lower end. Why not take a break until $400K then start applying again.
No one is being punished if they get a raise to above the cap, they are just paying the same tax rate as everyone else. It's called fairness. Why should a promotion/raise also come with a tax cut? Makes no sense, unless you embrace a regressive tax system, where the poor should pay a higher percentage of their income for taxes than those who make more.
The poor already pay the higher costs. The current 'limit' is set at 160K. Let's just keep that. But not expand it. Expand it from 400K up. There. Solved your little complaint re 'tax cuts for the rich'. No one currently paying would get a tax cut. There would only be 'new' revenue.
Note that you're putting words in my mouth. I never wrote about a little complaint re "tax cuts for the rich". Based on your original comment--about sticking it to people that get a promotion--and this misrepresentation, it's clear that I'm just talking to your hand and you'll only consider the merits of your argument.
Politicians love plans like you suggest here because who would not love a payroll tax cut.
I think the relatively small percentage taken for Medicare (1.45%) and Social Security (6.2%) would not put much of a burden on anyone--- especially considering that they will eventually benefit far more than they ever put into the system. Social Security is, and will remain, the foundation of most peoples retirement income. They should pay especially during periods where other economic priorities will impact how much they can voluntarily save/invest for retirement.
Also it would be great if all "Unearned Income" from investments, stock options, etc. were taxed at 2.9% for Medicare and 12.4% for Social Security, in addition to regular income taxes, with no cap.
The side benefit to such a scheme is that it would reduce the percentages required to support the system for every one from the minimum wage worker (and the employer who pays an equal share into the system) up to the richest billionaire.
Well. If the max is now 160K for taxable purposes. Then yes, you cut the 140-160 out and start again at 400. Which would be a tax increase for all incomes above 400. If you get more revenue that way then it is a tax increase not a tax cut.