US Social Security recipients might experience a 25% reduction in their monthly payments in the coming years unless something is done to reverse the current trend. This is due to the potential for the trust’s social security account reserves to run out of money during the upcoming ten years. According to some analysts, increasing the payroll for the Social Safety tax cap might aid in the problem’s resolution.
At the moment, employees contribute 6.3% of their salaries, and their workplaces match that amount. Nonetheless, incomes above the $160,200 income threshold are free from taxation (a threshold that around 5% of salary employees reach).
Increasing The Tax Cap
The social security trust reserves may be replenished and the initiative could continue to operate at the highest output for at least another ten years by raising the earning threshold to $250k (or perhaps more) or abolishing it completely. Also, by doing this, a portion of the cost of supporting Social Security would be transferred from the working class to affluent, high-wage individuals.
The presently known effective payroll Social Security tax cap rate for persons making more than the threshold is 1.5% or less. But, individuals whose incomes fall below the threshold are forced to pay a six-fold higher price.
Other Possible Remedies To Increase Tax Cap
Not all authorities and legislators concur that raising the Social Safety wage tax cap might be the most effective strategy for resolving the issue. Other suggestions include:
- 70 as the new full-time retirement age (now 65 to 67).
- The employment tax rate may be raised from 11.4% to 14.6%.
- Social Security privatization.
- Levying a State Pension revenue tax from investments and businesses (currently exempted).
