The "Taxable Maximum" Argument Continues to Gain Momentum
The movement to “scrap the cap” seems to be growing, even though eliminating the taxable maximum serves a legitimate purpose. That purpose is to balance the benefits available from Social Security with participants’ contributions to the program. In simpler terms, earnings above the current maximum ($184,500 this year) are not subject to payroll tax and do not increase benefits for those who exceed the maximum.
Recent headlines have focused on a bipartisan push by Elizabeth Warren (D-MA) and Bernie Moreno (R-OH) to eliminate the taxable maximum (officially known as the Social Security Contribution and Benefit Base) so that all earnings are subject to the 12.4% payroll tax shared equally by employers and employees, but with a twist: the additional taxes paid would not be included in the initial benefit calculation for those whose earnings exceed the maximum.
While eliminating the taxable maximum would improve Social Security’s revenue picture, many economists note that it would only partially address the program’s long-term $30 trillion shortfall. Further, it would tend to alter Social Security’s premise as an earned-benefit program, orienting it more toward a welfare-type program.
For more background on this issue, check out this post by Yahoo!Finance contributor Nathan Goldman, as well as this article posted on the Association of Mature American Citizens (AMAC) Newsline page.
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