During the first week of January, billionaires in the US received an early Valentine. They stopped paying into Social Security for the rest of 2025 because they had hit the cap on payroll contributions, even though the vast majority of working Americans pay in to Social Security throughout the year. To bring fairness to Social Security payroll contributions, Congress should end the cap on Social Security contributions.
Michael Hiltzik writes in an opinion piece for the LA Times that Tim Cook met his Social Security tax obligations at 2p on January 1, and Elon Musk met his obligations even earlier that day. But, 94 percent of Americans will contribute to Social Security throughout the year.
Unlike most Americans, the wealthiest Americans also are able to shelter a lot of their income from Social Security contributions. They do not pay Social Security taxes on any income they earn above $176,100 this year. (Last year it was $168,600.) That means that people who earn $10 million this year, pay Social Security taxes on just .11 percent of their income. This inequity is only increasing.
Our tax system works best for the wealthiest American. The Social Security tax is exclusively on wages, tips, bonuses and commissions. Unearned income, such as interest income, dividends and capital gains, are not subject to the tax.
Social Security is the most successful government program in history, lifting millions of older and disabled Americans out of poverty, supported by Democrats and Republicans alike. But, less wealthy Americans shoulder most of its costs. They contribute 6.2 percent of their income to Social Security.
The Social Security tax is regressive, though poor retirees receive a greater share of lifetime earnings from the program.
For years, Democrats in Congress have proposed raising or ending the payroll tax cap. Interest income and capital gains also should be considered earnings that are subject to Social Security taxes. If these earnings were taxed, it would extend the life of the Social Security Trust Fund by 35 years. It would also allow for higher benefits.
Today, Social Security contributions represent 12.4 percent of gross wage income. Employers and their employees each pay half, up to the cap. Each pay as much as $10, 918 this year. If you are self-employed, you pay the full amount.
In addition, employees and employers contribute 2.9 percent or 1.45 percent each in Medicare contributions, up to the cap. And, wealthy taxpayers must also pay 3.8 percent tax on some investment income into the Medicare Part A Trust Fund.
Here’s more from Just Care:
- Congressman Larson introduces the Social Security 2100 Act
- Social Security’s principles and values
- Expand Social Security, don’t means test it
- Beginning at age 70.5, you must withdraw money from your retirement accounts
- To reduce risk of bankruptcy, plan ahead for retirement
