Two months is all it took for millionaires to pay their 2023 Social Security taxes out of their paychecks, compared to the twelve it will take most other Americans.
Social Security is taxed only on the first $160,200 of a person’s income, meaning someone earning $83,333 a month, or $1 million annually, stopped contributing to Social Security on Feb. 28, according to the left-leaning think tank Center for Economic and Policy Research (CEPR).
In contrast, 94% of workers are paid less than $160,200 a year, so they pay a 6.2% Social Security payroll tax on all their paychecks.
“Despite earning much more than the average worker, a millionaire’s effective tax rate is far lower than that of the average worker,” CEPR says. “As a result, the burden of supporting Social Security falls most heavily on the working and middle classes.”
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How is social security financed?
Social Security is funded by a payroll tax of 6.2% paid by workers and another 6.2% paid by employers. The amount of earnings in 2023 subject to taxation is limited to $160,200 or a contribution of $9,932.40.
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Why does Social Security funding matter?
Without any changes, Social Security reserves are expected to be depleted by 2034, meaning benefits will be cut, according to the 2022 Social Security Trustees report.
In 2021, about 65 million people received Social Security benefits, including 50 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 9 million disabled workers and dependents of disabled workers.
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How can Congress keep Social Security solvent?
Senators Bernie Sanders and Elizabeth Warren led the introduction of the Social Security Expansion Act last month to lift the Social Security tax cap and subject all income above $250,000 to the tax. By doing so, the program would be fully funded through 2096 and increase the benefits people receive by $2,400 each year, among other things, they said.
The bill would have raised more than $3.4 billion from the nation’s top 11 highest-paid CEOs in 2021 alone, including $2.9 billion from Tesla and Twitter CEO Elon Musk, Sanders said.
Medora Lee is USA TODAY’s money, markets and personal finance reporter. You can reach her at email@example.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.