Idea 7 of 11 · working draft
Apply Social Security Payroll Tax to All Wages
Phase out the wage cap so people earning above it pay Social Security payroll tax on all their wages.
Social Security payroll tax applies to wages up to a yearly cap. This plan would phase out that cap, so people earning above it would pay the tax on all their wages. Use the added revenue to fund scheduled benefits, rebuild reserves, and strengthen the minimum benefit for long-time low-paid workers.
What it would do
- Phase out the wage limit on Social Security payroll taxes.
- Protect benefits, rebuild reserves, and raise the minimum benefit for long-time low-paid workers.
- Keep the money separate from housing loans and do not rely on stock market returns.
- Keep early claiming at 62 and require an independent funding review.
The main change
Today, Social Security payroll tax applies only up to a yearly pay limit. The plan would phase that limit out. People earning above the limit would pay the tax on the wages that are now above it. Workers below the limit already pay on all their wages.
What the estimates tell us
A previous analysis of a similar change estimated it could close roughly three-fifths of the 75-year funding gap. That is not an estimate of this full plan. A new, independent review is needed before claiming how many years of full benefits it would protect.
What the money is for
- Protect scheduled benefits and shrink the long-term funding gap.
- Rebuild the trust fund reserves instead of starting unrelated spending.
- Strengthen the minimum benefit for people who worked a lifetime at low wages.
- Require a new independent Social Security actuarial score before anyone claims a specific date when the program is safe.
What this plan does not do
It does not make benefits depend on stock market returns. It does not mix Social Security money with the housing bond plan. The trust funds need steady income when benefits come due.
Retirement age
Raising the retirement age for everyone hits hardest for people in physical jobs and groups with shorter life expectancy. Claiming early at 62 would stay available. Any future talk about age would need to protect lower earners and hard physical work.
Sources and background
Social Security’s actuaries explain how payroll-tax provisions can change the tax rate or taxable earnings limit. Their estimates concern the provisions listed there; they are not an actuarial score or solvency date for this working draft.
Common questions
- What is the “Apply Social Security Payroll Tax to All Wages” idea?
- Phase out the wage cap so people earning above it pay Social Security payroll tax on all their wages.
- How would it work?
- Social Security payroll tax applies to wages up to a yearly cap. This plan would phase out that cap, so people earning above it would pay the tax on all their wages. Use the added revenue to fund scheduled benefits, rebuild reserves, and strengthen the minimum benefit for long-time low-paid workers.
- The main change?
- Today, Social Security payroll tax applies only up to a yearly pay limit. The plan would phase that limit out. People earning above the limit would pay the tax on the wages that are now above it. Workers below the limit already pay on all their wages.
- What the estimates tell us?
- A previous analysis of a similar change estimated it could close roughly three-fifths of the 75-year funding gap. That is not an estimate of this full plan. A new, independent review is needed before claiming how many years of full benefits it would protect.
- What the money is for?
- Protect scheduled benefits and shrink the long-term funding gap. Rebuild the trust fund reserves instead of starting unrelated spending. Strengthen the minimum benefit for people who worked a lifetime at low wages. Require a new independent Social Security actuarial score before anyone claims a specific date when the program is safe.
- What this plan does not do?
- It does not make benefits depend on stock market returns. It does not mix Social Security money with the housing bond plan. The trust funds need steady income when benefits come due.
- Retirement age?
- Raising the retirement age for everyone hits hardest for people in physical jobs and groups with shorter life expectancy. Claiming early at 62 would stay available. Any future talk about age would need to protect lower earners and hard physical work.
- Sources and background?
- Social Security’s actuaries explain how payroll-tax provisions can change the tax rate or taxable earnings limit. Their estimates concern the provisions listed there; they are not an actuarial score or solvency date for this working draft.
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