Why is there a ceiling on wages subject to SS & medicare withholding?

[discntnt_irny_srcsm]

I hear all about how there's no money for 'medicare for all' type programs.
If folks with wages over $128,400/year had their wages over that amount taxed at the same rate (6.4% SS and 1.25% medicare) wouldn't there be a lot more of that could be done to help people in need?

Don't forget that those contributions are matched by the employer.
How about taxing dividends, capital gains, rents and interest income at the same rates?

[rzemanfl]

1. Gee Oh Pee. n/t

[shraby]

2. Because the people who don't need it make the laws.

[honest.abe]

3. I assume it's because there is also a ceiling on max SS monthly payment.

If more is withheld, more would have to paid out. That might create bigger problems.

[Yupster]

8. Social security uses a bendpoints formula to figure payouts

If a person contributes five times more into social security than another person he doesn't get five times the benefit - more like two times the benefit. So the program is already skewed toward lower wage workers or people who didn't work so many years.

This is unlike most teacher pension funds like Teacher Retirement plans where a principal whop made double a teacher gets double the benefit and a teacher who makes three times what a cafeteria worker makes gets three times the benefit.

I have long advocated a two prong plan to save social security, one each that each party would be against.

1. Lift the cap on earnings and benefits.

2. Make the program universal by bringing everyone into it including teachers who are not currently in it.

Those two prongs would save the program and would ask each party to give something up.

[honest.abe]

11. That sounds reasonable..

and could help solve the problem.

[drray23]

4. Indeed. If that cap was lifted it would make social security

Solvent forever. I am one of these people making more than this cap and I would be perfectly happy to pay that 6.2 % (I think it is) over my entire salary.

[Hoyt]

5. Actually, unless you cap the benefits, even that doesn't resolve

the projected SS shortfall. It helps, but it only solves about 70% of projected shortfall.

There is no wage limit on Medicare. That was changed some years ago.

[discntnt_irny_srcsm]

10. Thanks, I stand corrected on medicare

I still think doing something to help close the gap is a good idea.

[lostnfound]

18. Benefits are already capped. Nt

[KCDebbie]

6. If the ceiling on wages is raised enough, Congress

Last edited Mon Aug 27, 2018, 08:37 PM - Edit history (1)

Would be able ensure that SOC-SEC and Medicare is solvent indefinitely without raising taxes. [Of course Congress would be tempted to raid this account again unless there was new legislation banning this!] Dems have been talking about doing this since the early 90s but whenever they're in the majority they still allow the republicans to control the narrative about EVERYTHING!

[leftieNanner]

7. The Cap only applies to SS, not the Medicare deduction

all EARNED income is subject to the Medicare amount.

But I agree that the ceiling should be abolished. Although this has always left out the hedge fund babies who have no earned income at all, just interest etc.

[ProfessorGAC]

20. Thanks For That

I too, am a believer is eliminating the cap, but i have maxed out on SS for 20 years or more, but never have i seen a max hit on Medicare, UEI, or WCI. Only SSRI.
Not sure how we capture interest and yield though, because if that is the sole source of income, those folks never get a payout. So, taxing non-wage income as an insurance plan that never pays back is a tough political sell, i think.

[onecaliberal]

9. Yup. Lift the cap, problem solved.

[NRaleighLiberal]

12. because wealth makes people sick - greed takes over. they can NEVER have enough

and it is they who make the rules.

[discntnt_irny_srcsm]

15. Yeah, it's the golden rule

"Those with the gold make the rules."

[left-of-center2012]

13. Because rich people run the U.S.

[shanny]

14. 'cause rich people write the laws

[eallen]

16. Regarding social security, that was FDR's purposeful design

Every increment of payroll tax provides an increment of additional future benefit. Not linearly -- the system builds in a good deal of progressivity. But there is no tax dollar going into the system that anyone pays that is just a tax, without it also being calculated to the benefit to the payer. That was something FDR famously wanted, as a moral and political aspect of the system. Click here, to read his view directly.

Now, the cap certainly could be extended, and keep to that principle. And that would indeed help the funding gap.

[lostnfound]

19. Agreed - also, pressure to destroy it would only increase if cap was eliminated

Executives and highest income earners have a lot of clout. What they pay in social security seems small to them right now, relative to their income or their income tax. There would be a lot more focus on destroying social security if that 13% applied to ALL of their earned income.

I agree with raising it (or a gap like has been proposed) but getting rid of the gap would turn out to be bad politics.

[mopinko]

17. because it is basic insurance. no more, no less.

i vehemently reject scrapping the cap, or requiring taxes that do not return the same benefits.
however, i see no reason why capital gains and dividends shouldnt also me included in the program. a lot of people relying on this income dont need the basic insurance, but many do. they should also have access to this important social insurance.

the problem is that extending it to other income, and the way that independent contractors are taxed, having to pay both halves of the premiums is a heavy burden. it is also why many independent contractors dont pay their taxes at all. 13% is a heavy lift.
i can easily see the down side of changing this, but damn. i wouldnt volunteer to pay the full boat on that if i could avoid it, either.
in the gig economy, maybe this should be revisited.