According to a new report from the Center for Economic and Policy Research, few workers would be affected if the cap on federal payroll taxes were lifted. Currently, the payroll tax — which funds Social Security and Medicare — is only applied to an individual’s first $110,100 in wages, meaning that middle-class and low-income workers pay the tax on their entire income, while the wealthy pay it on only a fraction.
As CEPR found, just 5.8 percent of workers would be affected if the cap were eliminated, while just 1.4 percent would be affected by a proposal currently before Congress that would apply the tax to income over $250,000 (but not on income earned between $110,100 and $250,000):
Eliminating the payroll tax cap would ensure Social Security could pay full benefits for nearly 75 years. However, this simple solution is ignored by conservatives, who would rather take the more regressive step of raising the retirement age, or simply privatize the program. And it certainly doesn’t help that the mainstream media consistently misinforms the public about Social Security’s financial health, ginning up a “crisis” while ignoring that one simple step would wipe the crisis away entirely.