The (Simple) Payroll Tax Cap Issue: Keep Social Security SolventDec 10th, 2010 | By Sharon Shaw Elrod MSW EdD | Category: Social Security & Medicare
We’ve said it before and we will say it again, the best fix for Social Security is easy. It’s simple arithmetic. Social Security is not contributing to the deficit. In fact, the Social Security Trust Fund has loaned billions of dollars to the Federal Government, and has Treasury Notes to prove it. Social Security is solvent. There is only one thing our legislators need to change:
Lift the ceiling on payroll taxes so that wages over $106,800 are taxed. And make sure they are taxed at the same rate that middle class, non-wealthy Americans pay.
At the present time, any employee who makes more than $106,800 annually, pays no additional payroll tax (FICA) on anything earned above that amount. So if someone makes 106,801 annually and another person takes home $932,402 annually, they pay the same amount of payroll tax. The payroll tax, matched by employer, is what funds the Social Security Trust Fund.
Hardly equitable? It certainly is not. It is another example of wealthy Americans avoiding having to pay taxes on their wealth, something people like Warren Buffet strongly protest.
It’s hard to estimate how much revenue would be generated by removing the payroll tax ceiling. But it certainly is in the billions of dollars annually. And that seems to us to be a reasonable, easy to administer, appropriate fix for part of the deficit problem. It taxes people who are able to pay additional tax, and it does not compromise financial security for millions of middle-class Americans who depend on Social Security benefits for food and shelter.
This is not rocket science, Seniors. Let your legislators in Washington D.C. know how you feel about this option for keeping Social Security solvent.