Originally Posted by EvrClrx311
I find it interesting to see how the cap on SS taxes has changed over the years
In 1954 the max SS tax was on your first $3,600 wages... which in today's dollars would be the first $28,862 of your salary
In 1975 the max SS tax was on your first $14,100 wages... which in today's dollars would be the first $56,488 of your salary
In 1995 the max SS tax was on your first $61,200 wages... which in today's dollars would be the first $86,686 of your salary
In 2011 the max SS tax was on your first $106,800 wages... which is today's dollars
Could this be part of the problem with SS... has its sustainability over the last 50 years been partly due to its rising cap (bringing in more money), but now its gotten to a point where raising the max doesn't cover as much income anymore because its well beyond the average American salary?
Could the fix that people are now suggesting, that is removing the cap entirely, just be a temporary band-aid and in another 20 years we'll be in the same situation... except then there would be no cap to raise anymore?
Interesting point. I think the most meaningful statistic is the percent of all earned income that is below the wage base. In 1955, the average wage was about $3,155. In 2011 it was $41,674. The wage base clearly grew faster than the average wage, so more wages are taxed.
The 1983 amendments indexed the wage base to the average wage. Contribution and Benefit Base Determination
The thought was that the percent of total wages that would be taxed would be stable. But, unequal wage growth has the recent trend going the opposite direction, with greater proportions of the wages above the wage base.
Even with that, as you say, eliminating the cap entirely does not completely solve the SS funding problem. We're currently taxing about 84% of all earned income, but the actuaries project that in 20 or so years the taxes will only cover 77% of benefits.