On October 10th, the Social Security Administration announced that the cap on wages subject to payroll taxes increased to $176,100. While that news might not affect you as an individual, the announcement puts a new light on policies gelling on K Street to stabilize the program’s future.
Presently, Kamala Harris has said that she wants to make millionaires and billionaires pay their fair share. According to her website, she has promised “to strengthen Social Security and Medicare for the long haul by making millionaires and billionaires pay their fair share in taxes.”
The problem with that statement is that no one really knows what fair might mean or who might end up paying more.
So who are the rich? Back in 2019, Kamala Harris co-sponsored legislation which suggested that those who earn $250,000 are rich deserving to pay more for Social Security. Since that time, she has retreated in support of President Biden on the amount of tax that she wants to raise, as the rest of the party has doubled down on taxes.
So where did the $250,000 come from? That threshold of ‘rich’ has been around since at least when Bernie Sanders first introduced the Social Security Expansion Act back in 2015. At that time, the cap on taxable wages was $118,500. So over the last ten years, the earnings of the average guy on the street have grown by nearly 40%, and yet the meaning of ‘rich’ hasn’t budged by a dime.
Essentially, the wording hasn’t changed over the last 10 years – just the meaning of the word ‘rich’.
Democrats aren’t really talking about taxing the rich. They have found nuanced language that seems more appealing to the base than the honest answer which is that they plan to eliminate the cap. Back in 2015, the plan was to eliminate the cap over 20 years, and now the buffer is down to 8 if wages continue on the current path.
For those of you who aren’t paying attention to these details, about 18% of Americans earn more than the wage cap at some point in their career.
While Democrats talk about $250,000 as a threshold of the super wealthy, their actual legislation would impose taxes on those earning $200,000 in net investment income, and that figure is not indexed with time.
Maybe $200,000 seems like a lot. Keep in mind that there was a time that $25,000 per year indicated that you were rich. Back in 1983, Congress set the taxation of benefits to affect those with substantial outside income. Fast forward 40 years, the Social Security Administration does not believe that the tax is even collectible in full because the burden of the tax is excessive in part because the tax hits more than 50 percent of those who file income taxes.
While you, like many others, may have missed the news about the wage cap, it means that Democratic plans for Social Security will hit more people, more pockets, over a shorter period of time than at any time in the past 10 years. They just aren’t using that language.
It means that at some point in the future their tax plan will hit you.
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