Scrap the Cap #135

When I was a kid, 65 was not old, it was ancient. But sinceI started exploring social security there are rabbit holes about the funds running out. Going further down that path you’ll find one a famous SNL cold open parodying a presidential debate about putting social security in a lock box. 

https://www.youtube.com/watch?v=zDgRRVpemLo

It’s a given that the rich find ways to avoid taxes; they financially support politicians who create loopholes. I guess that’s the American way, but if we want to provide permanent and stable funding for social security we can. We just don’t have the will. 

Simple math facts: the standard tax rate for social security contributions is 6.2% for employees, taken out of their paychecks, another 6.2% comes from employers. So far so good. But here’s where the wealthy have gamed the system. The tax only applies to the first $184,500. Anything more than that doesn’t have any tax implications. 

Let’s say that over the course of a single year you make that $184K. That means you would pay 6.2% or $11,439 for the year. If double that income you pay $11,439. And if you are talented or fortunate or both to triple that you would contribute $11,439, not 6.2% but only 2% of the income.

Scrap the Cap. Remove the $184,500 ceiling. According to Wikipedia about 16% of American households earn more than that. And they don’t contribute, beyond the $11,439. 

H.L. Mencken was right about a lot of things and his most famous quote is, “For every complex problem there is an answer that is clear, simple and wrong.” He’s wrong, social security is complex, but to scrap the cap the answer is clear, simple, and right.