Why Is There a Cap on the Payroll Tax?

So, now you should have a better idea of what percentage of your wage goes into these funds. But that doesn’t answer the question as to why there is a cap, to begin with. It’s important to know, therefore, that at the inception of the program, President Franklin D. Roosevelt planned to exclude high income earners from the tax altogether. In fact, this exclusion covered those individuals who did nonmanual work while earning more than $250 per month.

It was when the proposal passed through the House Ways and Means Committee that changes were made. That was when the exemption was changed, thus making the taxable minimum of $3,000, though this number was continuously adjusted as time went on, particularly in correspondence with yearly wage increases.