Should We Raise the Social Security Tax Limit?

Should We Raise the Social Security Tax Limit?

In 2023, you only pay the Social Security portion of the FICA tax on the first $160,200. Earnings over that amount are NOT subject to this tax. And it’s this concept that has some people upset.

There are lots of folks out there who think it’s not fair that some people have to pay tax on every dime they earn, but high-income earners stop paying these taxes once they pass the limit. When you couple this with the possibility of benefit cuts in 2034, because the social security trust fund is going to be drained, it seems like an easy fix. Just raise or eliminate the Social Security tax limit.

See the history on taxable cap here

SS Pamphlet on SS taxes

CRS Analysis of Increasing the cap

OASI Historical Cos t

Cost of SS from CBO

Reuters article making the case for raising the cap

The Evolution of Social Security’s Taxable Maximum

Population Profile: Taxable Maximum Earners

Political History of the SS Act

SSA page says, “The average percentage of covered earnings subject to the tax max throughout Social Security’s history is 83 percent” Biden’s “donut hole” approach would extend SS by 5 years

The CBO report references 284K in 2019

See chart on the evolution of this cap here