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Will Taxing the Rich Save Social Security? Experts Weigh in

December 14, 2020 · Retirement Life
The grand stone columns of a historic government building against a blue sky.
Grand columns frame the Department of Justice, the institution overseeing the legalities of federal payroll tax caps.

Politics and the payroll tax

Over the years, politicians have expressed various ideas and proposals for the payroll tax and Social Security. President Donald Trump, for example, authorized a payroll tax-deferral although the Senate and House of Representatives stated that it “would not be in the best interests” of employees.

“Employers don’t see any benefit to their employees from the payroll tax deferral, and to implement it they would bear significant administrative costs and risks,” claimed Mark Zandi, chief economist at Moody’s Analytics. “Without additional financial support in the next few weeks, odds that the economy will backslide in the fourth quarter are well over even.”

In 2018, elected President Joe Biden declared that the Social Security program “still needs adjustments”. Sen. Bernie Sanders proposed a bill that would tax earned income over $250,000 and investment income over $200,000 (for individuals) or $250,000 (for couples), for Social Security benefits.

A modern city skyline at sunset with glowing office windows.
Gleaming skyscrapers illuminate the night sky, representing the high-income sectors central to the Social Security debate.

What will become of the payroll tax?

A great deal of money earned by the wealthy remains untouched by the payroll tax. The money that the payroll tax would bring in if such earnings would be taxed, could give the Social Security program a chance to continue beyond 2035 when it is projected to go bankrupt.

But even with these extra funds, the future of the payroll tax is by no means certain. We all know politics, political parties and political leaders play a huge role. What is certain, though, is that the Social Security program and its associated taxes will probably suffer some changes in the coming years.

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