Millionaires Have Already Stopped Paying 2021 Social Security
February 24, 2021
This is the month, each year, when millionaires stop paying into the system.
(AFGE/Flickr/cc)
By Sarah Rawlins
Common Dreams
Feb. 23 was the first day of 2021 that millionaires made no contribution to
Social Security.
Social Security gives retirement, disability, and survivor benefits to
almost 1-in-5 Americans every year, many of whom are children. However,
contributions to the program are capped to the first $142,800 of wage income
per year. This means that someone who earns $1,000,000 in 2021 stops
contributing to the program in late February.
Most people make less than $142,800 per year, so they pay the 6.2 percent
payroll tax on every paycheck in 2021. But those who make more than $142,800
don't have to pay into the program once they hit that cap. That makes their
effective tax rate lower than everyone else's; for a millionaire it's not
even 1 percent of their income. The burden of supporting Social Security
falls more heavily on those who make less.
Despite the importance of the program, the Social Security Trust Fund is
projected to have a shortfall in coming years, due largely to increasing
income inequality. In 1983, 10 percent of wage income was above the cap, in
2018 almost 17 percent was. This upward redistribution has shifted income
out of range of the program's supporting revenue stream.
Scrapping the payroll tax cap entirely and making everyone pay the same tax
rate, together with modest changes to the program, could eliminate the
shortfall entirely and allow for expanding benefits, which are increasingly
necessary to support American workers.
Sarah Rawlins is a program associate at the Center for Economic and Policy
Research in Washington, D.C.
This article is from Common Dreams.