“Tax the Rich” viewed as a panacea by some - but will it save Social Security? - Money Digest
Each year, the amount of earnings subject to Social Security payroll tax inexorably increases, causing affluent Americans to pay even more into the Social Security program. To illustrate, the so-called “taxable maximum” for Social Security has increased from $142,600 just five years ago, to $184,500 in 2026. In a nutshell, that means that everyone in that higher earnings bracket is going pay more FICA (or SECA self-employment) tax to Social Security. Since the American “upper class” is generally viewed as those whose annual income is about $170,000, the new 2026 SS taxable maximum means more of the upper class (e.g., “the rich”) will see their tax bill go up.
And that’s fine, according to some experts who have no sympathy for “the rich” and more affluent among us. But will raising the SS taxable maximum really “save” Social Security as some pundits suggest. Well, it will obviously help, but it definitely is not a panacea which will resolve all of Social Security’s financial problems. This Money Digest article by Colin Boyd discusses the annual raising of the SS taxable maximum and how it relates to the problem of Social Security insolvency.
While some other organizations only verbally lament this looming insolvency crisis, The Association of Mature American Citizens (AMAC) is actively engaged in providing Congress with ideas for a long-term solution. As an example of leading thinking on reforming Social Security, AMAC believes Social Security must be preserved and modernized to serve future generations. AMAC’s position is that this can be achieved without payroll tax increases through relatively minor program modifications, including changes to the cost-of-living adjustment (COLA) process and modifications to the formulas for calculating initial benefits for higher-income beneficiaries. Changes to the age for maximizing benefits are included in AMAC’s position, along with (1) an increase in the thresholds where benefits are subject to income tax; (2) indexing of these thresholds annually to account for inflation; (3) changing the taxable maximum formula to address the unintended loss of revenue; (4) improving survivor benefits, (5) eliminating the reduction in benefits for those choosing to work before full retirement age; and (6) improving savings tools for future retirees, including a savings account that builds estate value. AMAC is resolute in its mission that Social Security be preserved for current and successive generations and has gotten the attention of lawmakers in D.C., meeting with many congressional offices and staff over the past decade. See AMAC’s proposal for Social Security reform here.
I agree with number (3) changing the taxable maximum formula to address the unintended loss of revenue. Why have earners above the maximum ceiling always been excluded from paying into the fund? Most all of other taxes have no ceiling that excludes those above it. Income tax for example has a increasing progressive tax with no ceiling.
Cutting benefits for those who have paid the tax for years and are receiving benefits are not the ones that should bear the brunt of an ill managed program by the government.
The AMAC Foundation’s proposed plan for Social Security reform does include changing the taxable maximum, which would increased contributions by higher-earning workers. However, our plan is mostly directed more to solving a general demographic issue: only about 82% of workforce payroll is now subject to Social Security payroll tax, which is considerably less than the 90% of the workforce payroll which was historically subject to SS payroll taxes. In other words, too much of the American workforce payroll escapes contributing to Social Security. This is better articulated in AMAC’s Social Security Guarantee proposal, which can be reviewed at this website: https://amac.us/social-security-guarantee
In our proposal you will also see that AMAC also suggests altering the benefit formula to direct more benefits to lower income workers, as well as changing the current penalty for those who work while collecting early SS benefits. We agree that cutting benefits for those who have paid into it for years is not the way to go; rather we propose the opposite - increasing benefits for those who need it most, while decreasing benefits to those who need it least. And we also suggest increasing the threshold at which SS benefits are subject to inflation (thus reducing (or eliminating) income tax on SS benefits for those with lower incomes).
Martin, I hope this addresses your concerns, but please feel free to contact us again if needed.
Regards,
Russell Gloor
Certified Social Security Advisor
The AMAC Foundation