If no measures are taken in the near future, Social Security may run out of money by 2035, according to financial experts. With more benefits than actual money paid towards Social Security, it’s only normal for people to worry and want to know what will happen to Social Security in the future.
Experts have come with various solutions, each with its own advantages and drawbacks. One such solution was to change the percentage of taxable income for the wealthier individuals, given that a big portion of their earnings is not taxed for Social Security. But would lifting the tax cap really help the program?
What you need to know about the payroll tax rate and cap
Payroll taxes are the main source of funding for the Social Security program. Payroll taxes refer to taxes paid on the wages and salaries of employees, which go towards public programs such as Social Security and Medicare. These are paid by both employers and employees, based on paychecks and bonuses received and salaries paid to employees.
There’s a certain limit to the amount from your wage that is taxed for Social Security. The limit is adjusted annually, to keep up with inflation. In 2020, the wage base limit is $137700, up $4800 from 2019. It’s important to understand how this cap works and that what you earn above this limit is not subject to Social Security taxes. But just how much of it goes untouched, especially when it comes to higher earners? Read on to find out.