Lawmakers Propose Bill That Would Make Earnings Over $400K Subject to Payroll Tax, to Keep Social Security Solvent

By:
Chris Gaetano
Published Date:
Feb 25, 2019
GettyImages-Social Security-909586630

House Democrats have proposed a bill that, if passed, would extend the payroll tax to earnings above $400,000 as a way to keep the Social Security fund solvent for at least 75 additional years, according to CNBC. Currently, there is an earnings cap of $132,900; any income above this level is not subject to Social Security tax. The proposed legislation would leave income between $132,900 and $400,000 untaxed but reinstate the payroll tax for income above $400,000. Beyond this, it would also increase the payroll tax generally to 7.4 percent by 2043, up from 6.2 percent currently. Beneficiaries would also see a roughly 2 percent increase in average benefits, and the annual cost of living adjustment (COLA) would be made using an index that more accurately reflects costs for older Americans. Further,the bill would set a new minimum benefit of 125 percent of the poverty line, as well as double the amount of Social Security income that is not subject to taxation. 

CNBC said that the Social Security Trustees 2018 report projected that unless action was taken, Social Security beneficiaries could see a 21 percent cut by the year 2034; the Congressional Budget Office, meanwhile, said the action should have been taken in 2013. The CBO said that the problem is that income at the highest levels has grown faster than the average wage, meaning more and more dollars are out of the tax's reach. 

The bill, the Social Security 2100 Act, was introduced by Rep. John Larson (D-Conn.) and has been co-sponsored by 200 House Democratic lawmakers. 

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