Who is Above the Social Security Payroll Tax Cap
May 31, 2012
For Immediate Release: May 31, 2012
Washington, DC – Responding to criticism of his proposed reforms to Social Security, former Sen. Alan Simpson recently referred to a group of seniors concerned about cuts to Social Security as “greedy geezers.” While Simpson characterizes retirees who receive an average annual Social Security benefit of $14,000 as “greedy,” a new issue brief from the Center for Economic and Policy Research shows that simply raising or eliminating the Social Security payroll tax cap would only affect a tiny percentage of workers – the wealthiest in our nation -- while strengthening Social Security.
The Social Security payroll tax cap recently rose with inflation from $106,800 to $110,100 in 2012. In other words, annual income up to $110,100 is subject to the tax that most Americans already pay, but it does not apply to any income above this threshold. In other words, a worker who makes twice the Social Security wage cap – $220,200 per year – pays Social Security tax on only half of his or her earnings, and one who makes just over 1.1 million dollars per year pays the tax on only about a tenth.
The CEPR issue brief considers two scenarios that would raise the cap to calculate the portion of workers that would be affected. The brief also calculates the effects of both proposals on workers according to gender, race or ethnicity, and state of residence. The full findings of the brief are available at [link].
Fully eliminating the cap would only affect 6 percent of workers in America, and applying the tax only to annual earnings over $250,000, as proposed by legislation introduced by Sen. Bernie Sanders and Rep. Peter DeFazio, would just affect a little more than 1 percent of all workers. Currently, each bill has ten co-sponsors, including Senate Majority Leader Harry Reid.
S. 1558 co-sponsors:
Rep. Lynn Woolsey [D-CA6] (joined Nov 17, 2011)
Rep. Corrine Brown [D-FL3] (joined Feb 03, 2012)
Rep. Marcia Fudge [D-OH11] (joined Mar 29, 2012)