Payroll Tax

  • 02.01.17

    Who Pays If We Raise The Social Security Payroll Tax Cap?

    There has been a significant amount of discussion about Social Security. Many are concerned that the current model for Social Security is not sustainable and it will eventually not be able to pay benefits out to retirees. The Social Security payroll tax currently in place is capped at the same level for everyone, ...

    There has been a significant amount of discussion about Social Security. Many are concerned that the current model for Social Security is not sustainable and it will eventually not be able to pay benefits out to retirees.

    The Social Security payroll tax currently in place is capped at the same level for everyone, regardless of how much they make. In 2017 the maximum wage earnings that are taxed by the payroll tax is $127,200. This means that if you make any amount over $127,200, that extra money is not taxed. Ultimately this leads to a "regressive" tax structure where those making up to $127,200 are paying a higher percentage of their income than those who make more that that amount.

    This article looks at the effect that raising or eliminating the cap would have on income earners across the country. Based on its data " the vast majority of workers would not be impacted." This is because "roughly 1 in 18 people, or 5.4 percent of workers, earn more than the current cap and would be affected if it were eliminated."

    Percent of workers have incomes above the payroll tax cap