February 29, 2024
Just two months into 2024, millionaires are about to stop contributing to Social Security for the rest of the year. Most of us pay income and payroll taxes on all of our earnings, all year round. A portion of this taxed income goes toward Social Security, the vital program that provides retirement, disability, and survivor benefits to almost one in five people in the US.
Contributions to Social Security are not linked to how much money you make. Once someone reaches an income of $168,600 or more, they stop paying in. This means a millionaire’s effective tax rate is less than 1 percent — and they aren’t required to pay anything for their unearned investment income. This is compared to the 6.2 percent that any worker making less than $168,600 pays. The burden of paying for Social Security rests on working class people in this country.
We are seeing a shortfall in funds to keep the Social Security Trust Fund going. What is at stake if this program struggles to stay afloat? Most elderly beneficiaries (65 percent) rely on Social Security for the majority of their income and close to half of the elderly would be poor without Social Security. Around 7.4 million people receive disabled-worker benefits from Social Security (CBPP).
Social security needs to be expanded. Scrapping the payroll tax cap to make every earner pay the same tax rate, along with modest changes to the program, could eliminate the shortfall and maintain benefits.
Our calculator below lets you see for yourself when people with various wage incomes stop paying into Social Security.
Salaries of note you can enter into the calculator:
- $40,480: The median individual income in the US.
- $74,580: The median household income in the US.
- $20,900,000: Yearly salary of CEO Andrew Witty, UnitedHealth Group.
- $20,996,146: Yearly salary of CEO Jim Farley of the Ford Motor Company, where the historic United Auto Worker strike took place this year. The median total compensation of a worker at Ford is $74,691, which puts the ratio of salaries at 281-to-1.
- $24,810,000: Yearly salary of CEO Jim Taiclet, Lockheed Martin. This is the world’s largest weapons manufacturer.
Emma Curchin | Domestic Outreach and Research Assistant
Emma is the Domestic Outreach and Research Assistant at the Center for Economic and Policy Research.
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