# Why is there a cap on Social Security tax? **URL:** \ **Category:** Factual Questions\ **Created:** [September 29, 2011, 11:50am UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002 "2011-09-29T11:50:15Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![CookingWithGas](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cookingwithgas/32/485_2.png) [@CookingWithGas](https://boards.straightdope.com/u/CookingWithGas)\ **Post date:** [September 29, 2011, 11:50am UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/1 "2011-09-29T11:50:15Z")
What with all of this talk about class warfare, Buffett laws, and Social Security not being so secure, why is everyone so focused on income taxes? I am surprised that nobody is standing up to say that the Social Security tax should have no ceiling. Currently, only income up to $106,800 (this year) is taxed. Someone with a salary of $1 million has only about 10% of regular income taxed for Social Security, vs. 100% for a middle-income person, and his capital gains are not taxed for Social Security at all. Why isn’t that a no-brainer to help fix Social Security? ---
**Author:** ![Chessic\_Sense](https://avatars.discourse-cdn.com/v4/letter/c/7c8e57/32.png) [@Chessic\_Sense](https://boards.straightdope.com/u/Chessic_Sense)\ **Post date:** [September 29, 2011, 12:05pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/2 "2011-09-29T12:05:47Z")
Because benefits are capped, too. Lifting the tax cap but not the benefit cap is simply unfair, and would show SS to be what it’s been intended to be all along - a transfer payment. FTR, that’s a bad thing. ---
**Author:** ![Eva\_Luna](https://avatars.discourse-cdn.com/v4/letter/e/e495f1/32.png) [@Eva\_Luna](https://boards.straightdope.com/u/Eva_Luna)\ **Post date:** [September 29, 2011, 2:11pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/3 "2011-09-29T14:11:20Z")
> [@Chessic\_Sense](#): > > Because benefits are capped, too. Lifting the tax cap but not the benefit cap is simply unfair, and would show SS to be what it’s been intended to be all along - a transfer payment. FTR, that’s a bad thing. So why not tweak both? Why is that not a no-brainer? ---
**Author:** ![Kimmy\_Gibbler](https://avatars.discourse-cdn.com/v4/letter/k/bbe5ce/32.png) [@Kimmy\_Gibbler](https://boards.straightdope.com/u/Kimmy_Gibbler)\ **Post date:** [September 29, 2011, 2:19pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/4 "2011-09-29T14:19:35Z")
> [@Chessic\_Sense](#): > > FTR, that’s a bad thing. FTR, General Questions is a news forum, not editorial. ---
**Author:** ![njtt](https://avatars.discourse-cdn.com/v4/letter/n/ecd19e/32.png) [@njtt](https://boards.straightdope.com/u/njtt)\ **Post date:** [September 29, 2011, 2:20pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/5 "2011-09-29T14:20:55Z")
I think at least some people are talking about this. Its certainly not the first time I have heard the issue raised. I suspect it isn’t talked about more is simply because, given the way American politics works at present, it is not politically realistic to think that this could get through congress. > [@Chessic\_Sense](#): > > a transfer payment. FTR, that’s a bad thing. FTR that is a _good_ thing, both in terms of social justice and in terms of maintaining a vibrant economy. But, of course, you are right that the wealthy and powerful would think that is a bad thing (for them) and would prevent it. ---
**Author:** ![Omar\_Little](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/omar_little/32/269_2.png) [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)\ **Post date:** [September 29, 2011, 2:44pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/6 "2011-09-29T14:44:23Z")
> [@Kimmy\_Gibbler](#): > > FTR, General Questions is a news forum, not editorial. FTR, the OP is seeking an opinion, and this isn’t the proper forum for that either. ---
**Author:** ![Sateryn76](https://avatars.discourse-cdn.com/v4/letter/s/a88e4f/32.png) [@Sateryn76](https://boards.straightdope.com/u/Sateryn76)\ **Post date:** [September 29, 2011, 2:51pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/7 "2011-09-29T14:51:53Z")
It is my understanding that the Roosevelt administration did it that way on purpose, to avoid any implication of a transfer of funds from rich to poor. ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [September 29, 2011, 2:53pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/8 "2011-09-29T14:53:13Z")
There is a cap on SS taxes, so the rich pay the lowest rate of SS taxes. And the cap on the rate and the benefits have no relationship. That’s because it’s not a savings account or an insurance policy. It’s a government program which has achieved its intent of providing a better quality of life for Americans, while running a surplus which was used to pay for the costs of government programs intended to diminish the quality of life for most Americans to benefit a few. ---
**Author:** ![Kimmy\_Gibbler](https://avatars.discourse-cdn.com/v4/letter/k/bbe5ce/32.png) [@Kimmy\_Gibbler](https://boards.straightdope.com/u/Kimmy_Gibbler)\ **Post date:** [September 29, 2011, 3:02pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/9 "2011-09-29T15:02:12Z")
> [@Omar\_Little](#): > > FTR, the OP is seeking an opinion, and this isn’t the proper forum for that either. The question can be construed to be strictly factual, i.e., “What was the legislative intent that led there to be a cap on SS withholding?” Such a question has a historical answer in terms of the program’s objectives and expressed governing principles. Incidentally, it is also precisely the answer given in the first part of **CS** ’s reply. If a question in GQ is susceptible to more than one reasonable construction, we will choose an interpretation that avoids raising forum appropriateness problems. This can be considered a form of the avoidance canon of construction. ---
**Author:** ![Omar\_Little](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/omar_little/32/269_2.png) [@Omar\_Little](https://boards.straightdope.com/u/Omar_Little)\ **Post date:** [September 29, 2011, 3:09pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/10 "2011-09-29T15:09:07Z")
Discussions that lead to debate typically get moved…just sayin’. And the OP’s thread title and what he ultimately asked aren’t the same thing. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [September 29, 2011, 3:35pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/11 "2011-09-29T15:35:10Z")
> [@Omar\_Little](#): > > Discussions that lead to debate typically get moved…just sayin’. > > And the OP’s thread title and what he ultimately asked aren’t the same thing. And just for the record, I reported this thread and suggested it be moved. As you note, the thread title has a factual answer, but the text of the OP leads it toward a political discussion. ---
**Author:** ![Tom\_Tildrum](https://avatars.discourse-cdn.com/v4/letter/t/e95f7d/32.png) [@Tom\_Tildrum](https://boards.straightdope.com/u/Tom_Tildrum)\ **Post date:** [September 29, 2011, 4:11pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/12 "2011-09-29T16:11:32Z")
> [@TriPolar](#): > > And the cap on the rate and the benefits have no relationship. I don’t think this is quite right. A person’s SS retirement benefits are determined by how much he or she paid into the system over his or her lifetime, aren’t they? ---
**Author:** ![Chessic\_Sense](https://avatars.discourse-cdn.com/v4/letter/c/7c8e57/32.png) [@Chessic\_Sense](https://boards.straightdope.com/u/Chessic_Sense)\ **Post date:** [September 29, 2011, 4:42pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/13 "2011-09-29T16:42:35Z")
> [@Omar\_Little](#): > > FTR, the OP is seeking an opinion, and this isn’t the proper forum for that either. Then report me instead of junior modding. But FTR, I had already reported myself before you guys even rolled out of bed. ---
**Author:** ![Eva\_Luna](https://avatars.discourse-cdn.com/v4/letter/e/e495f1/32.png) [@Eva\_Luna](https://boards.straightdope.com/u/Eva_Luna)\ **Post date:** [September 29, 2011, 4:58pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/14 "2011-09-29T16:58:15Z")
> [@Tom\_Tildrum](#): > > I don’t think this is quite right. A person’s SS retirement benefits are determined by how much he or she paid into the system over his or her lifetime, aren’t they? IIRC yes, but the relationship is not strictly linear (it’s skewed a bit to provide proportionally higher benefits to people with lower career earnings). I’m trying to find a cite; if anyone has one, please post. ETA Aha! [Found one!](http://www.elderlawanswers.com/Elder_Info/Elder_Article.asp?id=700) “Myth 4: Proportionality While most people expect to receive retirement benefits proportional to their lifetime earnings, this is not exactly how Social Security retirement benefits are determined. In calculating a retired worker’s monthly benefit check, the SSA determines a “primary insurance amount” (PIA) based on the worker’s earnings over 35 years. But it weights the first few hundred dollars of average monthly income highest, and income over $4,483 a month (in 2009) lowest. The result is that low-wage earners receive a higher benefit relative to their lifetime earnings than do higher wage earners. (This is somewhat offset by the fact that the Social Security retirement portion of payroll tax is based on only a portion of the higher wage earners’ taxable income.)” ---
**Author:** ![Eva\_Luna](https://avatars.discourse-cdn.com/v4/letter/e/e495f1/32.png) [@Eva\_Luna](https://boards.straightdope.com/u/Eva_Luna)\ **Post date:** [September 29, 2011, 5:03pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/15 "2011-09-29T17:03:54Z")
Here’s some [further detail on how SSA retirement benefits are calculated.](http://www.elderlawanswers.com/elder_info/faqs.asp?sub=700&id=73) ---
**Author:** ![Simplicio](https://avatars.discourse-cdn.com/v4/letter/s/c37758/32.png) [@Simplicio](https://boards.straightdope.com/u/Simplicio)\ **Post date:** [September 29, 2011, 5:14pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/16 "2011-09-29T17:14:16Z")
> [@Tom\_Tildrum](#): > > I don’t think this is quite right. A person’s SS retirement benefits are determined by how much he or she paid into the system over his or her lifetime, aren’t they? [Here’s a congressional resarch](http://aging.senate.gov/crs/ss9.pdf) service report on the effects of lifting the cap on SS future solvency if anyones interested. It mentions the effects of keeping the same formula for benefits for people vs. changing the formula so that there isn’t an increase in payouts. The basic gist: > [@](#): > > Raising or eliminating the cap on wages that are subject to taxes could reduce the long-range > deficit in the Social Security Trust Funds. For example, if the maximum taxable earnings amount > had been raised in 2005 from $90,000 to $150,000—roughly the level needed to cover 90% of all > earnings—it would have eliminated roughly 40% of the long-range shortfall in Social Security. If > all earnings were subject to the payroll tax, but the base was retained for benefit calculations, the > Social Security Trust Funds would remain solvent for the next 75 years. However, having > different bases for contributions and benefits would weaken the traditional link between the taxes > workers pay into the system and the benefits they receive. ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [September 29, 2011, 5:35pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/17 "2011-09-29T17:35:36Z")
> [@Tom\_Tildrum](#): > > I don’t think this is quite right. A person’s SS retirement benefits are determined by how much he or she paid into the system over his or her lifetime, aren’t they? Yes. And the rate cap is based on income for individual years. The caps on both rate and benefit are set independantly, and arbitrarily. SS is always being massaged to make appear it to be some kind of annuity when it is a government program administered without regards to revenue and costs. ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [September 29, 2011, 5:36pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/18 "2011-09-29T17:36:52Z")
> [@Tom\_Tildrum](#): > > I don’t think this is quite right. A person’s SS retirement benefits are determined by how much he or she paid into the system over his or her lifetime, aren’t they? Yes. And the rate cap is based on income for individual years. The caps on both rate and benefit are set independantly, and arbitrarily. SS is always being massaged to make appear to be some kind of annuity when it is a government program administered without regards to revenue and costs. (and i agree this would work better in GD. the facts are dull, the implications are the interesting part) ---
**Author:** ![suranyi](https://avatars.discourse-cdn.com/v4/letter/s/e36b37/32.png) [@suranyi](https://boards.straightdope.com/u/suranyi)\ **Post date:** [September 29, 2011, 6:03pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/19 "2011-09-29T18:03:05Z")
> [@TriPolar](#): > > Yes. And the rate cap is based on income for individual years. The caps on both rate and benefit are set independantly, and arbitrarily. SS is always being massaged to make appear to be some kind of annuity when it is a government program administered without regards to revenue and costs. > > (and i agree this would work better in GD. the facts are dull, the implications are the interesting part) But the question was “Why?”, not “Was it a good idea?”, or "Should it be changed now?'. The answer to “Why?” is factual and historical. And apparently not very well known. ---
**Author:** ![TriPolar](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tripolar/32/3008_2.png) [@TriPolar](https://boards.straightdope.com/u/TriPolar)\ **Post date:** [September 29, 2011, 6:29pm UTC](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002/20 "2011-09-29T18:29:52Z")
> [@suranyi](#): > > But the question was “Why?”, not “Was it a good idea?”, or "Should it be changed now?'. The answer to “Why?” is factual and historical. > > And apparently not very well known. I think the “Why” is not something that can be factually established. The “Why” is just political blathering. The SS laws are the “What”, and that’s all that can be factually established. [Next page](https://boards.straightdope.com/t/why-is-there-a-cap-on-social-security-tax/598002.md?page=2)