The Social Security Tax Cap

By on March 13, 2013 in Current Events, Retirement with 56 Comments

According to the Congressional Budget Office, raising the federal retirement age to 70 would solve about half of (the) Social Security funding problem, while lifting the payroll tax cap would solve all of it.

The Washington Post  Oct 15, 2012

There is a good deal of concern, and much discussion, about entitlement changes.  Regarding Social Security, in particular, should the full retirement age be raised to 70?  Maybe a better idea would be to raise the earnings cap (aka: tax max) for paying Social Security taxes.  This idea seems to be more in favor than raising the retirement age.   However, like so many other ideas that look pretty good, it has a down side.  What is the down side?  What is the impact?

Lifting the cap on contributions to Social Security would simultaneously lift the cap on how much salary is included for calculation of the retirement benefit, or Primary Insurance Amount (PIA) .  It appears to be a “wash” – take more money from the high earners and then pay them a correspondingly higher benefit. Experts call the higher benefit “leakage.” But the leakage is not really a wash.

Social Security commissioned an interesting study on leakage, by three outside professors. A primary finding of the study is that even with the leakage, raising the tax cap would still result in a reduction of the SSA deficit, long-term.  The same conclusion was reached, to one degree or another, by the Congressional Budget Office, by the Congressional Research Service, and by the SSA Office of the Actuary, in a 2010 study for the Senate Committee on Aging..

Calculation of the PIA benefit favors low earners.  That is, a three-tier formula is configured to provide low earners a higher percentage of their earnings (Average Indexed Monthly Earnings, or AIME).  High earners get a lower percentage.  Let’s look at three 2013 examples:

Earner AIME Benefit Percent of AIME
John $700 $630.00 90.0
Mary $2400 $1226.38 51.1
Leonard $6000 $2248.44 37.5

Clearly, the higher the earnings, the lower the percent of earnings recovered.

Cap lift example.  Employee has been a high earner for 34 years.  Calculation is for earnings in 2012, his 35th year of earnings, which are $200,000 for the year.

Tax Additional Monthly
Employee Employer Total Benefit (aka: leakage)
Cap ($110,100) $6,820 $6,820 $13,640 N/A
Cap Lifted $12,400 $12,400 $24,800 $32.10 ($385.20 annual)

Without the cap, the employee pays $5,580 more in taxes, and his monthly benefit increases $32.10.  Including the employer contribution, the total additional taxes received by the trust fund in this example are $11,160.

Raising the earnings tax cap increases revenue for the fund significantly, even though the employee receives a higher benefit.  The high earners get something for their increased contributions, but the return is less generous than at the lower levels. Greater income for the fund means greater solvency for the Social Security program, which is what policy makers – and the rest of us – want.

However, questions remain.  Should there be no earnings cap at all?  Or should it be raised significantly?  It would seem there should be some kind of upper limit.  This would rule out extreme situations, like high earners who make, say, 500k or more per year and who would receive disproportionately large benefits out of line with Social Security intentions.

Retaining the cap for benefits calculation makes the claim “…lifting the payroll tax cap would solve all of it” (i.e., the funding problem) more plausible.  At the same time, however, it would mean high earners would receive no return at all for their higher contributions.  As a practical matter, this could be a real problem.

How much would lifting the cap save?  Due to complexity, uncertainty, and variability, this is quite difficult to calculate precisely.  But, as the Social Security professors study points out, there is no question among authorities that this initiative would be a net benefit to the fund:

To be sure, our estimates of the size of leakage of additional taxes into benefits are bracketed by the estimates of the CBO and CRS.  However, the differences are substantial, with the CBO estimate of leakage at about one-third, the CRS estimate at about two-thirds, and ours falling between, at roughly one-half.

In conclusion, despite leakage, and the unanswered questions, lifting or removing the earnings cap definitely appears to be a worthwhile policy change for improving the health of Social Security.

The author’s website for calculation of Federal benefits is here.

© 2016 Robert F. Benson. All rights reserved. This article may not be reproduced without express written consent from Robert F. Benson.

About the Author

Robert Benson served 35 years in various Federal agencies, as both a management analyst and IT specialist. He is a graduate of Northwestern University.

Post a Reply

Your email address will not be published. Required fields are marked *

56 Replies

Comments RSS

  1. hhradical1960 says:

    Yep…should raise it or eliminate it…however, the difference being soley earmarked for retirement.  After all, it is for the working middle class. In other words…working people that contribute may benefit from their labors.

  2. $15300432 says:

    there are over 6 million illegals drawing SS thanks to Bill Clinton and the Dems that made them are also 8 million people that have never contributed 1 dime to SS also on the rolls drawing $$$. Don’t believe check out Barak’s aunties from Kenya

  3. TomS says:

     I agree with your statement “You folks always want something for
    nothing.”  The proposal to eliminate the tax cap is simply a huge wealth
    transfer scheme.

      The “wealthy” have already taken a hit with the new tax rates and
    the tax increases imposed by Obamacare.  Below are the taxes an
    individual in the top marginal income bracket would pay if they lived in
    New York City.  Also listed are some of the increased taxes under

      Adding up the top marginal rates for federal income tax, state and local tax and the medicare tax comes to 54.64%.

     Obamacare also greatly increases the tax on capital gains and dividends which disproportionately affects the “wealthy”:


                    Capital Gains   Dividends   Other* 2012        15%                      15%             35% 2013+     23.8%                 43.4%         43.4%    The addition of a new 6.2% tax on the “wealthy” is confiscatory and unconscionable.


    Federal Income Tax rates:

    Rate            Single Filers                             Married Joint Filers                 Head of Household Filers

      35%        $398,350 to $400,000               $398,350 to $450,000           $398,350 to $425,000

      39.6%     $400,000 and up                      $450,000 and up                      $425,000 and up


    NewYork State income tax:

    · 6.65 percent on taxable income between $75,001 and $200,000.

    · 6.85 percent on taxable income between $200,001 and $1 million

    · 8.82 percent on taxable income of more than $1 million.



    New York City income tax:

    90,000  to  500,000   3,071 plus 3.648% of excess over 90,000


    500,000 to ……       18,028 plus 3.876% of excess over 500,000


          Obamacare contains 20 new or higher taxes on American families and small businesses. Arranged by theirrespective sizes according to CBO scores, below is the total list of all $500 billion-plus in tax hikes (over the next ten years) in Obamacare, their effective dates, and where to find them in the bill.

    $123 Billion: Surtax on InvestmentIncome (Takes effect Jan. 2013): A new,3.8 percent surtax on investment income earned in households making atleast $250,000 ($200,000 single). This would result in the following toptax rates on investment income:


                        Capital Gains                   Dividends                            Other*

    2012                   15%                               15%                                         35%

    2013+                23.8%                           43.4%                                     43.4%


    $86 Billion: Hike in MedicarePayroll Tax (Takes effect Jan. 2013): Currentlaw and changes:First $200,000($250,000 Married)Employer/Employee            All Remaining Wagesemployer/Employee

    Current Law                           1.45%/1.45%                                                                                  1.45%/1.45%                                                   2.9% self-employed                                                                     2.9% self employed

    Obamacare Tax Hike   1.45%/1.45%                                                                                           1.45%/2.35%                                            2.9% self-employed                                                                              3.8% self-employed  


  4. msgrowan says:

    The suggested approach of lifting the earnings cap entirely or to a new and much higher level and then assuming that the higher wage earners will cheerfully agree to pay in 6.2 percent of whatever their earned income comes to above the current cap is another example of putting faith in a static economic model, which assumes that individuals will continue to act in the future as they have in the past even when the tax system’s “rules of the road” change.  This particular change may indeed induce high earners to develop/negotiate different  personal compensation strategies to lessen/minimize cash wage income in response , e.g., through a shift to receiving enhanced stock options in place of wage income, etc.  The article’s example of the impact of lifting the earnings cap and its impact on an earner with $200,000 in wage income is instructive in this regard.  An increase in the annual FICA tax of $1,160 (to $24,800 from $13640) generates only an additional $32.10 in the monthly benefit.  Whether or not the professors’ conclusion that the Social Security trust fund would benefit from lifting the earnings cap is viable is thereby at least highly debatable.  Also, in any event, to be really beneficial the current system’s problematic approach, whereby any excess incoming FICA tax revenue (i.e., any amount exceeding the funds needed to pay current beneficiaries) must by law  be exchanged for nonmarketable Treasury bonds, needs to be ended.  Otherwise any additional FICA tax revenue will just be spent to fund current governmental operations.  In other words, the long promised Social Security “lockbox” must at last become a reality. 

  5. The Snowbear says:

    Well, Let’s see…… Our Social Security Trust Fund has no money in it at all – just a stack of worthless I.O.U.’s placed there by our glorius, beyond reproach, gallant elected officials! Now do you really think that IF the rules are changed, and all of a sudden there’s a lot more money coming into the system, that the additional funds WON’T be snatched up by the same WORTHLESS politicians like all the rest of the money? The FIRST thing that needs to be done is to make it AGAINST THE LAW to use ANY money from the SOCIAL SECURITY TRUST FUND for ANY purpose other than paying the taxpayer’s retirement benefits. Had these stinking, thieving, politicians kept their haqnds out of the fund in the first place, there wouldn’t BE a problem! This includes any payments to anyone who has not paid into the system. If people want to get a Social Security check in their retirement years, they should be required to EARN the benefit! No more free money checks to the worthless trash that won’t work and pay their taxes! No more payments to unwed mothers who think that they should get a check from the taxpayers while they lay around making babies without any means to support them! Welfare – if ANY money is being diverted from the SS trust fund for “welfare” or any other “social” program OTHER THAN payments awarded to WORKERS WHO HAVE PAID THEIR FULL, FAIR SHARE INTO THE SYSTEM, SHOULD BE HALTED IMMEDIATELY. This program is for WORKERS retirement benefits, NOT payments to those who elect to earn a living “under the table”  (and pay NO taxes!), or not at all, and expect to get free money at the expense of honest & hard working Americans who are not SCUMBAGS and have worked to earn a living for themselves and their families. NO WORK + NO PAYING OF TAXES = NO SOCIAL SECURITY RETIREMENT CHECK, PERIOD, END OF DISCUSSION!!!!!!

  6. IcekingZ says:

    And what about leakage of income from the private sector back to the government where it is blown out the door and replaced with special and worthless special obligation notes?  What leakage will that have on the economy?  It’s rather fitting that no study ever follows up on individuals and what occurs when their paychecks are plundered by government officials in an effort to repair a badly thought out government program.  It’s time for citizens to have an election to withdraw from social security and map out their own futures.

  7. Peter Hession, guest says:

    It’s amazing to me that a certain percentage of my fellow Americans have no respect for our treasury notes ,but have the biggest mouths and the least intelligence.

    • Japygid says:

      H.L.Mencken said it:   “Nobody ever went broke underestimating the intelligence of the American people.”

    • little taxpayer says:

      Here’s how the social security system works:
      I pay you $10 to hold until I need it (social security tax).
      You spend the $10 on beer, but write an IOU for $10 on a piece of paper (treasury notes as deposited in SS).
      When I need the $10, I have to pay you another $10 (income tax) so you can tear up the IOU and pay me the initial $10 back (social security).

      The fiction is that someone else will be paying the $10 you need to give me through their social security tax, so the IOUs don’t need to be touched.  However, as soon as social security has to pay out more than it takes in, it has to redeem those IOUs by taxing us again.  And again. And again….

  8. Peter Hession, guest says:

    A fact is; that all lower income and all middle class working Americans have been paying 6.2% of their entire earnings plus income tax on
    all of it. Another fact is; that higher earners, including millionaires and billionaires pay a much lesser percentage of their earnings. This has A falways been unfair and all Americans should pay an equal percentage to keep Social Security fully funded. This type of loophole must be

  9. Cpeter says:

    Lifting the earnings cap would make SS more of a welfare/income redistribution program than it already is and, thus, make it more susceptible to future political attacks.

  10. Thirtyfourtogo says:

    This is the most preposterous idea I’ve seen in a long time.  I hope you didn’t spend all night thinking this up.  Why does thei proposal seem crazy might you ask?  The SS fund currently have a bunch of worthless IOU’s in it and increasing the money available to be converted into more worthless IOU just doesn’t make sense.  Not today, not tomorrow, not ever!!!!Seriously, doesn’t anyone see a problem here?

    Just so I don’t appear to be too negative, there is one way this proposal might work—-Congress will have to enact legislation that would effectively close the cookie jar!  If anyone thinks the Congress would or could do that, I’d like to get some of what ever they are smoking!  I just don’t have the kind of blind faith the many people have in our elected representatives.  Shoot, they can’t even pass a budget and you think they could effectively pass legislation to prevent them from raiding the SS cookie jar! 

  11. wombat1951 says:

    If taxes are to be raised to get SS back into shape, it needs to be done in a way that not only funds the system, but at the same time stops over taxing everyone in the process.
    On an assumption that the benefit side of the equation is left at status quo [and I vigorously oppose leaving this side alone…it too needs fixing], what should be done on the taxing side is that the tax rate AND earnings limit that the tax will apply to should be adjusted annually to reflect the best estimate for the total revenue needed in the coming year to pay benefits.
    Doing this has the following benefits:
    1)  It stops the deceitful practice of continuing to claim that the “trust fund” has any value to the system.   The trust fund could disappear today and the SS system would not be affected — because there is nothing in the trust fund except IOUs from one part of the government to another.  
    2)  Related to #1 above, no more excess tax would be collected that claims are made are being “saved’ to help the system in the future.  Since this was NEVER the case anyway — stop taking more from us than needed to pay current benefits.
    3)  In the new “pay as you go” system, the public will very quickly get a real idea about what it takes to sustain the benefits they want in the system.   Transparency will prevail.  
    Merely raising the cap is a license for politician to overtax everyone again and again and again.   The pols will claim again — like they did 30 years ago — that the excess tax is being put away for the future.   They lied then, and they lie now.   Just removing the cap would be a tax bonanza for the “spending class” in DC, just as the Reagan/Tip O’Neil “deal” was a bonanza for government 30 years ago.
    A final thought that the author didnt’ address — the impact to the economy that sticking employees and employers would have by just removing the cap.   It, too, is not a trivial thing to consider.

  12. dnokc says:

    If you believe raising the cap on Social Security or increasing the percentage of payment into the fund will resolve it’s shortage…guess again.  Many of us were young on April 20, 1983 when Social Security was “saved for 75 years” by the Social Security Amendments.  It’s a simple but interesting read written in layman’s terms. Mr. Reagan championed it, Mr. Tip O’neill headed it up for the democrats. The concept was simple, increase Social Security contributions substantially from each paycheck…put overages into a lock box. Our paychecks did see a substantial hit…unfortunately the  “lock box” only lasted until Mr. Reagan got out of office. Mr. O’Neill attempted to have the increase of SS tax repealed…but he was in the minority and the increase stayed in place.  Many interesting characters involved whom you may remember, ie. Big Joe Biden, Alan Greenspan & Harry Reid among others. Bottom line…if SS or any other tax is increase $5…those clowns in Washington will spend$10!

    • wombat1951 says:

      The “lock box” never existed.   Excess SS revenues were handled the way they always were handled — sent to Treasury for inclusion in the General Fund for expenditure, and replaced with IOUs from the government to itself.
      The politicians in BOTH parties have been lying to us for decades about the true nature of the system.   In effect, we have all been excessively overtaxed for 30 years….and not a penny of all of that excess taxation was saved for future use for the SS system.

  13. skisok says:

    I am in favor of raising the cap and adjust it yearly to cover the yearly shortfall.  I don’t think it is a I am opposed to raise the retirement age.  I am opposed to raising the cap to some arbitrary amount as that revenue will be abused by Congress.  I think it is only fair since the Congress has taken away the surpluses that should have been there to help those who cannot help themselves even though it would negatively effect me.

  14. Skisok says:

    I think the cap should be tied to the expected shortfall and adjusted yearly.  I am opposed to making it some arbitrary amount so that it could be abused by Congress.  But I am fully for raising the cap to offset the shortage eventhough I would be affected by it.  I think it is only fair after Congress has pretty much taken the money from the folks who could least afford it.

  15. vbuf says:

    The earnings cap should be removed and a maximun benefit established. Whenever you attempt to implement a “social” program, some will inevitably pay more than others. School taxes are an example, homeowners who may have no children in the system still pay the taxes. Some may have had more than one child educated by the system as compared to maybe a couple with only one child.
    I doubt that a 100% fair and equitable payment system can be determined, but the program has been established and it’s civic responsibility to fund it and apply it as fairly as possible, but certainly high earners won’t be banished to the poor house, just ask the Geckos on Wall St.

  16. Vbuf007 says:

    Why all the concern about rate of return for the high income earners?  There should be no cap on earnings and there should be a maximun benefit amount.  Let’s see, homeowners who have no children in school still pay school taxes well into their retirement years or consider the couple that has only one child go thru the system as compared to couple with several or more children being educated, and assume they are both paying the same amount in school taxes.  The pain is certainly less at the top and the tax isn’t that oppressive.  We need a school system and it’s a public responsibility so landowners pay regardless of benefit derived. Social Secuity is another social system and requires a public responsibility to provide, is it 100% fair, no, but what is when you try to implicate a social program?

    • HDandIT says:

      So no cap on earnings, but a cap on benefits.  So the guys that earn the most now will pay the most and get the least…..  and you think that is fair.  Look at the table in the article.  The guy that makes the least gets almost as much from social secutiry as he earned in his life.  I don’t see how paying in more and getting out less is fair.  With a cap on benefits, there should be a cap on earnings. 

  17. Manage This! says:

    The cap needs to be done away with if we are entitling people to get money they never paid in or to pay for the maintenance of children and spouse on the demise of the worker. The payout at 14 times the collection just does not work for the lower end earnings base and the 6.2% from the cap at $645/month worker plus $645/month employer still results in a loss of almost $1800 on an equivalent payout when the worker is disabled or deceased. The program was never engineered to manage these considerations, paying out nearly 1/3 of the moneys to families of deceased and members and families of disabled. Probably the worst consideration is that these are paid at the time of event for life – way more than the 30 years of expected life considerations for an average retiree. If they were looking at this as an Insurance policy, then they should have designed it with a more appropriate risk assessment and fee based on factors relating to health, risk and other more realistic computation – not an across the board payout (tax) to Insure the population even those with unsafe or unhealthy activities/conditions.

    First – to qualify for SS (except as disabled or the surviving immediate family of disabled/deceased), a person has to have worked at least 10 years and their income has to have been at least $4520 for the year to get the the minimum benefit which would be based on their total taxable income on this formula:
    (a) 90 percent of the first $749 of his/her average indexed monthly earnings, plus
    (b) 32 percent of his/her average indexed monthly earnings over $749 and through $4,517, plus
         (c) 15 percent of his/her average indexed monthly earnings over $4,517.

    Based on that – yes, the 90% is relevant to the table as you depict it.  The bigger problem with this is not the percentage being paid out to the earning/eligible retiree, its the 150%-180% that is paid out to the surviving spouse/child under 20 at about 50% for each up to the maximum.  So as long as there are two kids left in the home, the distribution is more than the system can support.  The Adults need to enter the work force, but with free money – they, for the most part, have no intention to contribute to the working class.

    For AIME of $700 lets do the math here for a second – that implies a base income on a full time worker of less than half the minimum wage over their entire lifetime which really suggests something less than likely, if you are considering it for a part time worker (more likely) then the computation works out a bit better, but really, who is a part time worker for just 10 years of their life and then closes up shop for the rest of their lives and never earns more than the $700 a month as depicted by your table.  Total full time work hours in a year 2087, $700 x 12 (mo) = $8400 annual / 2087 hours = $4.0249/hr, if you go with part time – say an average of 20 hours a week, then the math is about half (which is still less than minimum wage)  1043 hrs, $700 x 12 = $8400 / 1043 = $8.05 / hr, still below the minimum wage.  Such perceptions do not belong in the computation as it is irrelevant unless you are trying to prove the point that staying at the low end of the earnings window is a real boon for them at payout time.  On top of that – the entire expression/scheme of leakage is a wash as it is not the fundamental problem with the SS program at all.  So, based on only getting the perfect maximum benefit per dollar paid is to hit it hard for a few months at $10 per hour and work for a total of 452 hours – or about 12 weeks.  Do that once a year for ten years and your future is solid – guaranteed money for life make sure you have two minor kids in the house and you’ve set your income at three times the base or between 150% and 180% of what was earned – their payout to SSI was way way less – 6.2% of $700 = $43.40. So, in truth – they get about $1050-$1260 paid out for their $43.40 put in (plus their boss matching another $43.40). So, in no way does this work out that the system can sustain it over any length of time when the out exceeds the in by more than 14 times. The fundamental problem is the established payout rules that have been added in the last 50 years that defines compensation to recipients that neither worked nor contributed substantially to the program to start with.  I’m not saying there should be no support system for the disabled children of SS eligible “Deceased/Retiree”, but paying money out to these individuals / minors with the expectation that the family (not just the incapacitated minor) is entitled and that the computation is based on the number of members in the family results in paying money of an eligible in multiples of what their contribution was.  That in addition to the premise that many of them continue to receive this money without any need or desire to work – that is the real leak here.We should take it back to the rules where at least one of the conditions that should be in place for all recipients is that all of the family members over the age of 18 and under the age of 60,  living in or having any substantial interest in the occupants or household must be employed at a minimum of 30 hours per week to continue the eligibility of the individual(s) who are receiving.  When you kick out the rule that enables a family to keep receiving as long as there are minors in the house – you remove the incentive to just keep pumping out kids for the monetary benefit.The leakage – the focus – of the SS is that we have turned it from a program to substantially prevent poverty in old age to a system of benefits which when used in the manner of the last 30 years, pays out more than twice what the total contribution was of the wage earner and the employer over the live of their employment.  On top of the other part of the problem – the basic distribution of the payouts as shown below (based on 2011 figures):
    Category  Amount (billions)  Percent of Total Social Security Benefits
    Retired workers and their families   $490  ~68%
    Survivors of deceased workers  $107  ~15%
    Disabled workers and their families  $129  ~18%

    • Japygid says:

      “but really, who is a part time worker for just 10 years of their life and then closes up shop for the rest of their lives and never earns more than the $700 a month as depicted by your table”

      I am such a worker, to the extent when I applied to Social Security for my benefit, I had exactly 40 credits/quarters.  Coincidentally, my benefit, before being clobbered with the Windfall Elimination Provision, was almost exactly the amount shown in the table.  Aside from that, I worked as a fed for 35 years, under CSRS, which is not covered by Social Security.

      In addition to the various exceptions, there are also exceptions to the exceptions.  Nonetheless, I believe the cap change, in one form or another, is truly a good thing.

      • wombat1951 says:

        As a CSRS retiree, you are living large :)    You were “clobbered” by the WEP because, frankly, you were already being supported in retirment quite comfortably by the taxpayers.
        SS was NEVER intended to be a retirement program.  It was…and should return to being as it’s founders had intended… a true “safety net” program to ensure that the truly indigent won’t have to endure old age in abject poverty.

  18. grannybunny says:

    If both caps — on income and benefits — were removed, the system would be permanently solvent.

    • HavingFunYet says:

       permanently solvent, until politicians immediately continue to use the funds to not pay for SS benefits, but for wasteful spending — like to pay for grant studies, like the National Institute of Health is doing now, to learn why 75% of American lesbians are fat, but homosexual men are not.

      • grannybunny says:

        The change would so radically improve the ratio between the amount coming in and the amount going out that insolvency would be highly unlikely, under any realistic scenario.

        • HavingFunYet says:

           yet again, you ignore the fact, that all funds coming in are being spent in the general fund.  Insolvency is here, due to spending in the general fund.  No increase in contributions will change that.  We just will get to learn more about why lesbians or fat, or some other absurd federal expenditure.

      • OldRet says:

        This is very simple. Homosexual women don’t have to impress heterosexual men so there is not the incentive to stay slim and trim and they are content being heavier. We all know that most heterosexual men like slim and fit women so it would make sense that homosexual men like slim and fit men. There…problem solved now send me my research check!!!

  19. Tanstaafl says:

    This shows why a  private option needs to be permitted and expanded.  
    The politicians looted my 50 years of forced 12% contributions to the “trust fund” leaving only NON_marketable IOUs (showing they could not be trusted).

    Why not permit me to take 10 or 20% of the forced tax and control its actual investment in growth investments.  If I had earned only a compound 3% over my 50 years of SS taxes my monthly payment would be much larger.  

    Let it be elective –  trust the politicians if your prefer, but let other free people make their own investment decisions.

    When a govt program fails the govt’s only and constant response is to raise taxes and spend more on the same failed model.  Change the model, don’t give more money/control to the politicians over our retirement years — they have proven they can’t be trusted!!

  20. ifonlyicouldretire says:

    sounds like a far better plan. Leave the retirement age alone. Many, many people will not be able to make it that far and its wholly inappropriate to deny them a decent retirement income in the years they do have left. The cost of health problems alone can wipe them out so until the day this country gets off its high horse and embraces the benefits of a public health system in tune with europe and canada’s best ideas, seniors will always pay the ultimate price in their final years. Lets make those years the best we can for those that need it most.

  21. AKFed says:

    Removal of the cap on income subject to SS withholding is an idea who’s time has come. This needs to happen before any discussion on raising the retirement age. What increasing the age does is penalize those who work in physically demanding jobs. A person can’t work construction Etc. into their 70’s, your body just plain wears out. Another benchmark for a reduced rate of withholding, say $250K, would not be unreasonable but all income should be covered.

  22. unionrep says:

    The SS program is not a ponzi scheme, it is an insurance plan. Payroll taxes “insure” workers for a guaranteed earned income-related benefit should they live to retirement or become disabled in pre-retirement years. It also can help “insure” additional benefits to dependents under certain conditions. The only drawback is that there is no pay-out if the worker does not claim benefits before death and there are no eligible dependents. It’s not perfect, and changes have been needed and are still needed to keep up with the times. Lifting or eliminating the earnings cap would go a long way to aiding solvency certainly without “hurting” the workers who would have to pay in more, nor adversely affecting employers who can afford to pay high salaries in the first place. Why not put that in place to start and see where it takes us? There can always be other adjustments over the next 25 years or so should the cap changes be insufficient. One other note: baby boomers, who are being dubiously credited with causing the depletion of the “trust fund”, will eventually die off and as they do, the impact on solvency will also scale back. The first hit full retirement age in 2012 and last hit full retirement age by 2031 so the bubble peaks in between and then falls off. It seems that we should be careful not to implement permanent changes in general eligibility that are not needed.

  23. Danl_P says:

    i am a very conservative Libertarian. Even with that said, i see no problem with removing the income limit and taxing all income while simultaniously capping the benefit amout by using a maximum income line of $200k and above. My boss makes over a million dollars a month in salary (obviously I am no longer a Fed). It would cost GS 12 and above a bit, but it would increase their retirement income. It would cost my boss a ton and reduce his retirement income slightly (insignificantly was his word), and he has no problem with it if it resolved the Social Security crisis.

    Also, remove all non-retirement programs from Social Security and move those programs to HHS. Then they would have to be funded out of annual budget funds that are more visable.

  24. little taxpayer says:

    Just a note about the Greatest Generation.  My grandfather was proud of providing for himself and his family his entire life – even through the Great Depression.  He held two or three jobs at a time his entire life, lived frugally but comfortably, and was able to save enough for a comfortable retirement and to provide nursing home care for 8 years for my grandmother.  He reluctently applied for social security when he retired from his last job when he was about 70, but only because he had paid so much into the program.   He didn’t want to be “on the dole” so every dollar of SS he received went to charity.

  25. denvermanjb says:

    SS is the biggest Ponzi scheme that ever was.  Every politician that ever had anything to do with using Social Security money to fund government operations and programs not specific to Social Secuirty shoul be jailed for theft, and made to reimburse the American prople from their own private estates.

    • LaborAttorney says:

      But they haven’t violated anything except for your sensibilities.

    • Tanstaafl says:

      Let us set up a parallel private pension scheme . . . . the business owners collect 12% of the employees’ compensation.  They put it in a trust fund to pay future obligations.

      Then these “employers” start to loot the trust fund.  They (like on-the-job gamblers who embezzle) replace the looted funds with NON-marketable IOUs.  Then, when the victims of the looting ask for promised payments from their withheld earnings, the looters (politicians) say the victims are greedy and that current corporate (us govt) income is too low to make-up for the stolen trust funds.
      AND that is where we are today!  Dishonorable and untrustworthy politicians stole my deposits, spent my money, left NON-marketable (no value)  IOUs, and  now have the lack of character  to blame me.  A pox on them.

      My solution — the pension and benefits of every politician who voted to loot my funds should be forfeit to SS funding, they should be lifetime barred from any public trust, and all assets over a minimal level seized and added to the SS trust — as is proper under under ERISA and related laws.

      We may not be able to jail the bums, but they should be made to pay for their dishonorable conduct — in a bi-partisan way.


      • $31427826 says:

         Actually you have the plan of every corporate CEO in America.  That is how they financed all corporate takeovers

    • grannybunny says:

      In order to be considered a Ponzi scheme, there would have to be elements of deception or fraud.  Everyone knows how Social Security works; there’s no fraud or deception involved.  There’s nothing criminal about a pay-as-you-go system.

      • HavingFunYet says:

         yes, because we know that there is no money in the trust fund, it makes it legal — a sanctioned Ponzi scheme by our government — yet still a Ponzi scheme.

      • HavingFunYet says:

         and yet is fraud — because SS was not designed to be a “pay-as-you-go” system.  It was designed to be an insurance program for the very poor — not a pay-as-you-go retirement plan.  The only reason it’s not technically criminal is because it’s sanctioned by the government, and no one can sue the federal government.  If any private sector entity was performing this activity, you would have your granny panties in a twist. 

      • HavingFunYet says:

         yes, indeed — because our benevolent government provides small type in the Federal Register as a tool to inform its subjects of how their SS contributions will be used in the general fund (rather than in the SS trust fund) that indeed erases “elements of deception and fraud” — and therein makes the Ponzi scheme legal, and acceptable due to this disclosure.

        The same actions by any private company’s pension fund would (and have been) declared illegal — and, yes, a Ponzi scheme.

        But for those that still believe our government is benevolent and without corruption, will turn a blind eye to these facts… with open hands, depending on the government to give to them what has been already been stolen and spent, and now borrowed from future generations.

        And there is no help for you.

      • OldRet says:

        Just to play devil’s advocate, if I get a statement that tells me how much Social Security I’m due to get when I qualify and I’m promised that I will get a COLA based on the CPI increase (not the chained CPI) and then I get less than promised on both accounts, is that deception?

        • grannybunny says:

          I guess it would depend on the statement.  The statements I get have prominent disclaimers to the effect that they are only estimates — based on the data currently available — and that the actual amounts may vary.

    • pams says:

       I believe the money coming into the SS trust fund is invested, and one of the things it invests in, one of the safest investments anywhere, is US government bonds. Yes, the federal govt is using SS money– but it is a loan, not a theft.

  26. Retmil2017 says:

    I am all for raising the cap or eliminating it.  A raise to 250K or 500K I think would suffice as long as you also pass a resolution to keep congress from dipping into the fund.  It is time congress found other means of keeping the country solvent than taking from the programs that are meant to help the people.

  27. Opinionated_Lady says:

    Mr. Benson, in advance of all the nasty comments you are about to receive, let me say “thank you” for this most reasonable and well thought out article. 

    Let me also say that restoring jobs to the country, raising the minimum wage and reducing underemployment would also help the program substantially.   There is probably some sweet spot between taxing all wages and lifting the current cap to a higher level that would be equitable and, unlike the proposed chained CPI, would not result in seniors having to depend on cat food manufacturers for sustenance. 

    • Japygid says:

      Thank you.  A tax cap, as outlined in my article, seems to me like a really good initiative.  It may, of course, need some fine tuning, but I like it.

      • A A says:

        If you want to maintain the benefits as they exist today maybe everyone should pay more. You folks always want something for nothing. You want someone else to pay for your benefits. The well off are already getting a reduced return on their contributions (progressive PIA computation). How about everyone pays their fair share. A combination of a small  FICA tax increase plus an age increase along with a more accurate inflation index is the fair way to proceed. Everyone gives a little and all members of the public can actually claim SS is an earned benefit not a welfare benefit that someone else paid for.

        • TomS says:

           I agree with your statement “You folks always want something for nothing.”  The proposal to eliminate the tax cap is simply a huge wealth transfer scheme.

            The “wealthy” have already taken a hit with the new tax rates and the tax increases imposed by Obamacare.  Below are the taxes an individual in the top marginal income bracket would pay if they lived in New York City.  Also listed are some of the increased taxes under Obamacare.

            Adding up the top marginal rates for federal income tax, state and local tax and the medicare tax comes to 54.64%.

           Obamacare also greatly increases the tax on capital gains and dividends which disproportionately affects the “wealthy”:


          Capital Gains











             The addition of a new 6.2% tax on the “wealthy” is confiscatory and unconscionable.


          Federal Income Tax rates:


          Single Filers

          Married Joint Filers

          Head of Household Filers


          $0 to $8,925

          $0 to $17,850

          $0 to $12,750


          $8,925 to $36,250

          $17,850 to $72,500

          $12,750 to $48,600


          $36,250 to $87,850

          $72,500 to $146,400

          $48,600 to $125,450


          $87,850 to $183,250

          $146,400 to $223,050

          $125,450 to $203,150


          $183,250 to $398,350

          $223,050 to $398,350

          $203,150 to $398,350


          $398,350 to $400,000

          $398,350 to $450,000

          $398,350 to $425,000


          $400,000 and up

          $450,000 and up

          $425,000 and up


          York State income tax:

          6.65 percent on taxable income between $75,001 and $200,000.

          6.85 percent on taxable income between $200,001 and $1 million

          8.82 percent on taxable income of more than $1 million.



          New York City income tax:

          90,000  to  500,000   
          3,071 plus 3.648% of excess over 90,000


          500,000 to ……       
          18,028 plus 3.876% of excess over 500,000


             Obamacare contains 20 new or higher
          taxes on American families and small businesses. Arranged by their
          respective sizes according to CBO scores, below is the total list of all $500
          billion-plus in tax hikes (over the next ten years) in Obamacare, their effective
          dates, and where to find them in the bill.

          $123 Billion: Surtax on Investment
          Income (Takes effect Jan. 2013): A new,
          3.8 percent surtax on investment income earned in households making at
          least $250,000 ($200,000 single). This would result in the following top
          tax rates on investment income:


          Capital Gains












          $86 Billion: Hike in Medicare
          Payroll Tax (Takes effect Jan. 2013): Current
          law and changes:


          First $200,000
          ($250,000 Married)

          All Remaining Wages

          Current Law

          2.9% self-employed

          2.9% self-employed

          Obamacare Tax Hike

          2.9% self-employed

          3.8% self-employed

  28. Pinottimme says:

    Until Congress raids the coffers again

  29. Pinottimme says:

    Until Congress raids the coffers again

  30. Lee_Lucas says:

    It’s amazing to me that the government considers a person getting some (not all) of their own money back by way of a “benefit” is termed “leakage.”  I tell you, if these folks were in the private sector running a pension program, we would all run from them and ask the US Atty to seek indictments for fraud.