How the (Super Rich) Are Killing Social Security | Robert Reich.

Social Security is heading for a funding cliff, with its trust fund reserves potentially becoming insolvent by 2033 — an outcome that would mean beneficiaries would face a 25% shave on their monthly checks. But there is a way to fix most of the funding shortfall, policy experts say: "Smash the cap."

That refers to the Social Security tax cap, a feature of the program since it was launched in the 1930s following the Great Depression. Essentially, any income over the earnings cap isn't subject to the Social Security payroll tax, which is 6.2% for workers and an additional 6.2% for employers.

In 2023, the tax cap stands at $160,200, which means any income above that amount is exempt from the payroll tax. As a result, middle- and lower-income workers bear a much greater tax burden in funding Social Security than the 6% of Americans who earn above the threshold, according a new analysis from the left-leaning Center for Economic and Policy Research.

"If you make over that cap, like 6% of the population does, you could be paying 1% of your income or even less than that," noted Sarah Rawlins, program associate at CEPR.

Yet a middle-income worker earning less than the $160,200 cap in 2023 will pay an effective tax rate that is six times higher than the millionaire's tax burden, she noted.

That's why the Congressional Budget Office (CBO), a federal agency that provides financial analyses of policy issues, calls the Social Security tax cap "regressive" — middle- and low-income workers pay a much greater share of their income toward the program than the rich.

Eliminating or lifting the tax cap could help stabilize Social Security's trust fund by providing more revenue to the program, Rawlins said. A December analysis by the CBO found that eliminating the cap for earnings over $250,000 would keep the trust fund solvent through 2046.

Meanwhile, some lawmakers are proposing changes that include both getting rid of the tax cap and other changes to address Social Security's funding challenges.

Senator Bernie Sanders, an Independent from Vermont, and Senator Elizabeth Warren, a Democrat from Massachusetts, in February introduced legislation that would stabilize the trust fund for the next 75 years.

Among their plans: Lift the tax cap for people earning $250,000, and add the Social Security tax to investment and business income, which is currently exempt from the tax.