Taxing More Earnings Won’t Fix Social Security’s Finances | Economics21

Taxing More Earnings Won’t Fix Social Security’s Finances | Economics21
"...The purpose of this piece is instead narrowly informational: to explain why increasing (even eliminating) the cap wouldn’t accomplish nearly as much financial improvement as many people believe.
Background: The 12.4% Social Security payroll tax is assessed on worker earnings up to an annual limit currently set at $127,200. 
 The cap is statutorily indexed to grow (with rare exceptions) with growth in the national Average Wage Index (AWI). 
 A worker’s eventual benefits are based in large part on his/her career earnings subject to payroll taxation.
The reason the cap exists is rooted in Social Security’s historical design as a contributory insurance program rather than a welfare program. 
  President Franklin D. Roosevelt and other program founders wanted to ensure that Social Security covered and would have wide support from Americans rich and poor. 
 As a result, workers at all income levels pay into Social Security, and workers at all income levels earn benefits as they do so. 
 Past a certain point, higher-income people don’t need extra benefits, so both their contributions and benefits stop.
...In any event, a tax cap increase by itself does very little to fix Social Security’s financing problem.
...It just wouldn’t do much to mitigate the other tough choices required to balance Social Security finances..."
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