Raising the cap on Social Security is a fix that many people support as the best way to fix any shortfalls and ensure that vital retirement planning tool remains solvent indefinitely.
Now, Sen. Bernie Sanders, I-Vt., and Senate Majority Leader Harry Reid, D-Nev., have jointly proposed a twist on this idea. Rep. Peter DeFazio, an D-Ore., introduced a companion bill in the House.
Their bill would eliminate the cap on payroll taxes on earnings above $250,000. It would not affect earners who make between the current cap -- $113,700 -- and $250,000. The Center for Economic and Policy Research says this change would only affect the top 1.3 percent of workers.
The United Steel Workers, who are advocating passage of this retirement legislation, calculate the effect on someone earning $1 million a year this way:
- The 12.4 percent payroll tax would be split equally between employer and employee and would be applied to the first $113,700 earned just like it does now.
- There would be no payroll taxed levied on income between $113,700 and $250,000, but once an employee reached that threshold, he and his employer would again pay into the fund at the same levels.
- Someone earning $1 million a year would pay an additional $46,500 into Social Security and his employer would pay the same $46,500.
- In this proposal, workers making more than $250,000 would not receive any increase in Social Security in return for paying more.
These additional contributions would add $85 billion per year to the Social Security fund and ensure that the program was 91 percent solvent over the next 50 years, according to the Social Security Administration.
What do you think? Is this proposal fair or does it punish some of our hardest working, most productive people for their success?