Social Security advocates delivered a petition to Congress on Thursday urging legislators to remove a tax cap that allows the U.S.’ wealthiest people to cease paying into the system after reaching a certain threshold.
The petition, which netted 120,000 signatures, was delivered to Republican House Speaker John Boehner by Social Security Works, the Campaign for Community Change and the Service Employees International Union.
Social Security’s old-age, survivors and disability insurance program caps the amount, based on the national average wage index, of an individual’s salary that may be taxed for Social Security.
For 2014, the maximum is $117,000; if a person is employed by third party, he or she pays 6.2 percent of that, or a little over $7,200, to Social Security. After an individual reaches that cap with a single employer in a calendar year, Social Security taxes are no longer deducted from his or her paychecks.
There are 9.63 million U.S. households with a net worth of $1 million or more, according to a recent study by financial firm Spectrum Group. Many will reach the tax cap before the majority of working-class Americans.
"Most workers have Social Security contributions withheld from their paychecks every week for 52 weeks of the year," said Nancy Altman, a co-director of Social Security Works. "If you’re a millionaire, you stop paying right around now. For someone like Warren Buffett, you’re done paying Social Security taxes in January."
When the cap was established in 1937, 90 percent of people paid Social Security tax on all their income.
But in recent years, pay has risen faster for wealthy Americans than it has for the working class. In some instances, workers have seen their salaries decrease. Today 70 to 75 percent of annual salaries fall below the cap.
If all salaries were taxed in full, the country’s Social Security trust would grow. However, that isn’t likely to happen anytime soon — especially since Congress is mostly composed of millionaires and rely on wealthy donors who lack incentives to impose such a change.
Marilyn Moon, senior vice president of the American Institutes for Research, said it’s also not likely to happen because many members of Congress have promised constituents to never raise taxes.
"For them it isn’t a matter of principle or fairness. It’s essentially almost a religious statement," Moon said.
"It is very difficult in the current political climate to imagine that happening, unless it was part of some other larger compromise that was made."
However, Mood added that the Social Security tax cap will eventually need to be lifted in order to keep the system afloat.
It’s not unprecedented, she said. In 1993 the federal government lifted the cap for Medicare.
"Social Security and Medicare are two of the most successful federal programs, and I don’t think that we will let it lapse," she said. "Most of us are not wealthy enough to make it through the rest of our lives without some form of help from either program," so eventually the cap will have to be lifted or modified, she said.
Altman agrees, arguing that requiring wealthy Americans to pay year round is an issue of fairness.
“Social Security works extremely well, but its benefits should be increased and expanded. A fair way to pay for benefit improvements is to require millionaires and billionaires to pay Social Security contributions on every dollar of their salaries, just as typical Americans do.”