Adding $1.5 trillion to Social Security over the next 10 years might seem like a complex problem that would need teams of Social Security and financial experts to work on, but the solution is rather simple. Right now 90 percent of people pay Social Security taxes on all of their income, but 10 percent don’t. Social Security has a cap on taxing income. The cap is $132,900 and everything earned over that amount is not subjected to Social Security taxes. If Social Security taxes applied to all income earned, including everything over $132,900, it could add $1.5 trillion to Social Security over the next 10 years.
Obviously this is a significant amount of revenue Social Security is currently missing out on. As a recent story from The Motley Fool points out, Social Security is facing a funding gap of $13.2 trillion between 2034 and 2092, which is a period of 54 years. Conservatively estimating that Social Security could generate $1.5 trillion each decade, if the cap on earnings would be lifted, it is not a stretch to estimate that Social Security could add revenue in the ballpark of $8.5 trillion from 2034 to 2092, which would leave a funding shortfall of less than $5 trillion. Remember also that if the cap was removed this year it would add another $3 trillion or so to Social Security even before 2034.
Even lifting the cap on earnings does not solve Social Security’s funding shortage until 2092, but it does go a long way towards solving the problem. Other measures would probably be needed to fix the rest of the shortfall, but this would be a good first step in solving the Social Security problem. The problem with the solution is not the complexity of the issue at hand, but the politics of the matter. The top 10 percent of earners are not going to take kindly to seeing a tax increase, but the question that should be posed to these earners is why should 90 percent of people pay Social Security taxes on 100 percent of their income and they should not?
