If the government does nothing to change the current tax cap that is in place, then the Americans who receive Social Security could see their monthly benefits dropping by 25% in the next few years.
This is due to the Social Security trust fund reserves that could ideally become insolvent over the next decade. Some experts are also of the opinion that increasing the Social Security payroll tax cap could end up solving the problem. As is the situation currently, workers pay around 6.2% of their total wages, and their employers do match that contribution. However, any earning that goes over the income cap set at $160,200 will be exempt from this tax.
Experts Believe Raising The Tax Cap Could Alleviate The Sufferings of Social Security Recipients
Experts believe raising the tax cap to $250,000 or completely eliminating it would definitely replenish the reserves in the trust fund- whilst keeping the program running at full capacity beyond the next decade. Interestingly, if one were to do this, they would also be shifting a lot of the burden of funding social security from the middle class to the uber-wealthy, high-wage earners. Currently, those who earn over the set cap do pay an effective Social Security payroll tax rate of just 1% or less. However, those who do earn under the cap get stuck footing a bill that is six times higher than the rest.
As it stands, not every expert is of the opinion that raising the tax cap is going to help. Therefore, they have proposed other solutions- such as increasing the full retirement age to 70, increasing the payroll tax rate to 15.6%, and completely privatizing social security.
