Within the next few weeks, the average millionaire will be done paying into Social Security for the year because the payroll tax is zero on income above $128,400. 10,000 “Baby Boomers” become eligible for Social Security benefits everyday, and if our legislators continue to insist that their social security benefits must be tied to the FICA tax, our tax system can not adequately provide for them. Repealing the cap on the Social Security tax is far past due.
The tax that Americans pay into for Social Security benefits upon retirement is called the Federal Insurance Contribution Act (FICA) tax. 95% of citizens pay the FICA tax year-long because their annual salaries fall below the cap, according to huffingtonpost.com. Raising the cap to capture more revenue from the remaining 5%, the top earners in the country, could make a world of a difference in how we treat our senior citizens.
It is estimated that $2 trillion of annual earnings bypasses the FICA tax, which was not originally intended at all. The wage inequality we are currently experiencing was not expected nor taken into account when the FICA tax cap was put in place. In a tax system full of loopholes that benefit the top 1%, the FICA cap stands out as one of the most regressive parts of the tax code. Unfortunately, the effects of this are felt by the most financially vulnerable among us.
More than 60% of all retired workers currently rely on Social Security for at least half of their monthly income, and a third count on it for 90% or more of their income. Our seniors’ quality of living is directly related to the amount of money acquired by the FICA tax. This, of course, does not have to be so, but until our politicians understand that their spending power is not tied to tax revenue, the only feasible way to improve Social Security is to increase the cap on FICA. It’s a shame the wealthiest among us would rather fill their coffers then ensure all Americans can retire and live their last years in dignity and comfort.
In a tax system that has been openly influenced by the wealthiest class of citizens, this piece of the tax code is the most regressive. Because of the cap, millionaires and billionaires pay into social security at a lower rate than hard-working middle and lower class citizens. If we want to ensure every citizen lives in dignity and comfort once they reach retirement, we should look into removing, or even doubling, the cap on contributions to the program.