This is, by far, the most popularly supported strategy to increase contributions to Social Security. The vast majority of both working and retired Americans support abolishing the income cap that prevents the wealthiest Americans from contributing to payroll taxes on all their income.
In an effort to create a payroll tax system that doesn’t unfairly ask a small amount of wealthy individuals to fund a disproportionately large portion of Social Security—especially considering there is a maximum benefit amount that may not be equivalent to a wealthy person’s lifetime contributions—legislators created an income cap. This cap kicks in after the first $168,600 a person makes.
This means anything a person makes after $168,600 is NOT taxable under FICA.
This tax cap has been part of Social Security since the 1930s.
But comparing incomes between the 1930s and the 2020s, we see a tax cap that has not kept up with an ever-increasing disparity between the wealthy and the middle class.
Around the time Social Security was put into law, there were only about 20,000 millionaires in the country. These days, there are over 200 million Americans who can call themselves millionaires (and over 700 of them are billionaires—the first ever confirmed billionaire in the United States was Henry Ford in 1925).
With a huge increase in the number of Americans making income far exceeding our current tax cap and a huge gap between the $50,000 income of the average American and 200 MILLION people making million-dollar incomes, the income tax is said by many to be regressive.
The income tax cap shields billions of dollars every year from being taxed to fund Social Security. Requiring all Americans to pay FICA taxes on 100% of their income—something most Americans already do—would provide a significant boost to Social Security’s coffers.
