February 13th is an important day. It’s a symbol of our country’s skewed priorities when it comes to taxes, because today is the day that someone earning one million dollars per year will be done paying into Social Security tax, or FICA, for the rest of the year. The same cannot be said for 90% of Americans whose income will be subject to the tax all year long.
The FICA (Federal Insurance Contribution Act) income cap is the point at which one’s income is no longer subject to the 6.2% social security tax that (almost) everyone pays on their earnings. But under the current law, only the first $132,900 of earnings is taxed. After that, high earners no longer pay into Social Security for the entire year. The average American, however, contributes with every paycheck.
As it is now, the income cap on FICA is not only regressive, but unnecessary. It has been around since the tax began in 1937, but has not kept up with disproportionate wage growth or explosive wealth inequality. As a result, almost $2 trillion in earnings a year are not subject to the FICA tax, limiting the amount of revenue collected for Social Security.
In the richest country in the world, the majority of citizens live in fear that Social Security will no longer be there when it is their turn to claim it. Unfortunately, this fear is all too credible. Every day, 10,000 Baby Boomers become eligible for Social Security, and after ten years the Republican Tax Cuts and Jobs Act will have added almost $2 trillion to the national deficit. This is a recipe for disaster, and one that Congress has been hesitant to act on. Thankfully, there is a clear solution.
Scrapping the income cap would mean decades of guaranteed full benefits for our aging working class. Even bringing top earners’ FICA contributions up from less than 1% so they align with the average taxpayer at 6.2% would be better than doing nothing. After all, most of our members don’t even notice when they stop paying into the FICA tax, and with the donor class tax cuts going into effect this filing season, many will be even more able to pay their fair share. With Americans living longer than before, and over 60% of retired workers relying on Social Security for at least half of their monthly income, the time to act is now.
Ultimately, it’s time our country decided what is more important: ensuring our seniors can live out their lives in dignity and comfort, or keeping yet another regressive tax on the books for millionaires and billionaires to enjoy.