Social Security, the program that provides retirement, disability, and survivor benefits to almost one-in-five people in the US, stops getting support from America’s wealthiest today. Thursday the 24th is the first day of 2022 that millionaires make no contribution to the program.
Most people are not aware that Social Security contributions are capped at the first $147,000 of wage income. That means that someone who earns $1,000,000 per year stops paying into the program less than two months into the year. Because so little of their income is subject to the tax, a millionaire’s effective tax rate is less than 1 percent. Compare that to the 6.2 percent that any worker making less than $147,000 pays, and it is clear that the burden of paying for Social Security rests on those who make the least.
Most people are aware, however, that the Social Security Trust fund is projected to have a shortfall in the future. Many factors contribute to the shortfall, but a sizeable part of it is increasing income inequality. When the payroll tax cap was codified in 1989, only 10 percent of wage income was excluded. However, more than 18 percent of wage income is projected to be over the tax cap in the next 10 years.
Scrapping the payroll tax cap to make every earner pay the same tax rate, along with modest changes to the program, could eliminate the shortfall and allow for crucial expansions to benefits.
Our calculator below lets you see for yourself when people with various wage incomes stop paying into Social Security.
Some salaries of note to enter into the calculator: