The Biden administration has long called for changes to the way Social Security payroll taxes are applied to fund benefit increases for Social Security recipients. Under current law, all taxpayers only pay the Social Security tax on their first $142,800 worth of income (the earnings cap will increase to $147,000 in 2022). The latest version of the Social Security 2100 Act would keep that rule in place.
The plan would also reinstate the payroll tax on income in excess of $400,000. In other words, only income between the annual earnings cap and $400,000 would be exempt from the Social Security tax.
We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the latest proposal to change the Social Security earnings cap.
Below is a summary of the debate that ensued between the two professors.
Bloink: The highest-income taxpayers in the U.S. take home the largest Social Security checks once they begin claiming benefits in retirement. These same taxpayers also pay Social Security taxes on the smallest portion of their income and are the least likely to rely on Social Security benefits for necessary income during retirement. Wages between the $147,000 earnings cap (in 2022) and $400,000 would continue to be exempt from Social Security tax.
This would serve only to ensure that high-income taxpayers are contributing their fair share to this social program that’s already available to everyone.
Byrnes: Social Security benefits for high-income taxpayers are determined in exactly the same manner as they are for low and middle-income Americans. The proposal may provide much-needed changes to modernize the system as a whole. There’s no rational basis for increasing taxes on higher-earning taxpayers, however.