Is lifting the cap the solution?
Lifting the cap on the taxable earnings might be a solution but not necessarily a clear one. While some think taxing the wealthy and their higher earnings is the right course of action, others have pointed out that lifting the cap has its pros as well as its cons. Let’s take a look at some of them.
Pro: Higher Social Security revenue
Raising the tax cap would certainly increase the annual Social Security revenue. This measure is all but necessary in order for the Social Security program to continue in the future. Otherwise, as projected by the Social Security Board of Trustees, Social Security funds will only be able to cover 75 percent of its costs and deplete by 2035.
Pro: No more fiscal imbalance
With the percentage of taxable income different for high-income earners and average workers, no wonder the imbalance between these groups has aggravated throughout the years. Removing the tax cap would mean the same percentage of earnings would be paid by everyone towards Social Security.
Con: Only earned income gets taxed
Everyone agrees that lifting or changing the tax cap would be useful, one way or another but there’s one thing you need to keep in mind. The cap would only affect the earned income. The unearned income that accounts for a large portion of the rich’s source of revenue would still remain untouched.
Con: Could change the essence of the program
In the grand scheme of things, a change of the benefits calculation method would change the entire Social Security program. For the moment, millions of workers and their dependents rely on the fact that the program would ensure them a source of income in retirement. If the calculation of benefits would be modified, higher earners would be required to pay more, without the program actually collecting more.
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