Raising the Social Security Payroll Tax Cap: How Many Workers Would Pay More?
On January 1, the maximum amount of
annual earnings subject to the Social Security tax – a.k.a. the payroll
tax cap – increased to $113,700. Every year, this cap is adjusted to
keep up with inflation. Many Americans are not aware that income above
the cap is not taxed by Social Security. In other words, workers who
make $113,700 or less per year pay a higher Social Security payroll tax
rate than those who make more. To help alleviate Social Security’s
long-term budget shortfall, raising — or even eliminating — the cap has
gotten some attention from policy makers. A new report
from the Center for Economic and Policy research finds that just 1 in
20 workers — the wealthiest — would be affected if the cap were
eliminated entirely, and only one in 75 would be affected if the cap
were applied to earnings over $250,000. In addition, the share of
workers who would pay more varies greatly according to gender, race,
state, and age.