If President Biden is serious about preserving Social Security, as he demonstrated with great theatrics at his State of the Union address, he should work with Congress to eliminate the salary cap on the payroll tax.
The Social Security payroll tax salary cap is set at $147,000, which means that no one pays the tax on any qualifying income over this amount. In other words, someone earning $1 million pays exactly the same dollar amount in Social Security payroll taxes as someone earning $147,000. The tax is currently set at 12.4% and usually is split evenly between employer and employee.
This regressive system is the opposite of the federal income tax, which exempts the first $9,499 in earnings from income tax. The Social Security payroll tax, on the other hand, is levied on the first dollar of income up to $147,000.
Eliminating the cap would not only make the payroll tax less regressive, it would fully fund the Social Security Trust Fund through 2060, which is 25 years longer than the Social Security Administration’s current estimates of when the fund will become insolvent. This would also eliminate other hard choices, such as raising the retirement age, recalculating benefits, reducing payments or means testing — all of which would disproportionately affect lower-income workers, women and people of color.
Peter Busowski
Jeannette