Fix for Social Security Is Full Participation by the High-Income, Not Benefit Cuts

A “wage cap” means those with the biggest paychecks stop contributing to the system after the first $168,600 of salary received in 2024.

By William Rice

Republicans are threatening to cut Social Security—shrinking already paltry benefits for vulnerable seniors, disabled people, widows and orphans—when the right answer to the program’s funding problems is to make sure everyone fully participates, including the highest-paid employees. Right now they don’t: a “wage cap” means those with the biggest paychecks stop contributing to the system after the first $168,600 of salary received in 2024. (The cap rises each year with inflation.) Every dollar made after that—and in some cases, that’s an awful lot of dollars—goes Social-Security-tax free.

In fact, the lucky folks who make a million dollars a year finished up their Social Security obligations this week. Anyone who’s paid a billion dollars annually was done shortly after the ball dropped on New Year’s Eve. Yet the needs of Social Security recipients—and the program’s funding problems—go on all year.

Social Security is the most successful anti-poverty program of all time. It lifts almost 23 million Americans above the poverty line, including 16 million who are over the age of 65. Without Social Security, the poverty rate among seniors would be nearly 40%; with it in place, it’s 10%. 

And yet the average monthly benefit as of January was only $1,770. And for about 40% of seniors, Social Security provides at least half of their income; for about one in seven, it’s pretty much the only source of income. 

Despite what avowed enemies of Social Security wish for and claim, the program is not about to go bankrupt. Even if we did nothing to strengthen it, retirees and other recipients would continue to receive benefits (albeit reduced) for decades to come. That’s because it’s largely a pay-as-you-go system, with taxes on current workers paying for the benefits of retirees and others. But the Social Security trust funds, which historically have built up surpluses that allow for higher benefits, will be depleted sometime next decade. 

The GOP is trying to hide its intention to cut Social Security benefits behind a so-called “fiscal commission” charged with coming up with ideas to reduce government debt. The trick is to assemble a group of supposed experts that will meet behind closed doors, then emerge with a plan that includes cuts to benefits. Congressional Republicans can then try to deflect political blame to the commission when the outrage of the American people predictably erupts. 

But the Republicans do not want the commission to consider ways of raising new revenue, such as lifting the wage cap. So it’s all a scam with a predetermined bad result. 

There are real solutions instead. Senators Elizabeth Warren (D-MA) and Bernie Sanders (D-VT) have introduced legislation that would lift the cap on wages over $250,000. It would also apply the Social Security tax to high-income business owners and investors who currently don’t pay it at all. These reforms would produce enough revenue—exclusively from people making over a quarter-million dollars a year—to increase benefits by $2,400 a year and extend the solvency of the trust funds for 75 years. Rep. John Larson (D-CT) has introduced a similar bill that would raise taxes on income over $400,000. 

The Social Security wage cap—like the reduced tax rate on investment income and other loopholes for the wealthy—is a secret from most working people, because you likely have to benefit from it to know about it. It’s up to progressive activists and politicians to get the word out so pressure builds to end these special breaks instead of cutting benefits that form the bedrock of working-family economic security.