money Social Security is one tax you won't have to pay anymore this year if you're a millionaire
Two months is all it took for millionaires to finish paying their 2023 Social Security taxes out of their paychecks, compared with the twelve it will take most other Americans.
Social Security is taxed only on the first $160,200 of someone's income, which means someone who earns $83,333 a month, or $1 million annually, stopped contributing to Social Security on February 28, according to the left-leaning think tank Center for Economic and Policy Research (CEPR).
By contrast, 94% of workers are paid less than $160,200 a year, so they'll pay the 6.2% Social Security payroll tax on all of their paychecks.
"Despite earning much more than the average worker, a millionaire’s effective tax rate is far lower than the average worker’s," CEPR says. "As a result, the burden of supporting Social Security falls most heavily on working-class and middle-class people."
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How is Social Security funded?
Social Security is financed by a 6.2% payroll tax paid by workers and an additional 6.2% paid by employers. The amount of earnings in 2023 subject to taxation is capped at $160,200, or at a $9,932.40 contribution.
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Why does Social Security funding matter?
Without any changes, Social Security reserves are expected to be depleted in 2034, which means benefits will be cut, according to the 2022 Social Security Trustees report.
In 2021, about 65 million people received Social Security benefits, including 50 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 9 million disabled workers and dependents of disabled workers.
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How can Congress keep Social Security solvent?
Senators Bernie Sanders and Elizabeth Warren led the introduction of the Social Security Expansion Act last month to lift the Social Security tax cap and subject all income above $250,000 to the tax. By doing so, the program would be fully funded through 2096 and raise the benefits people receive by $2,400 each year, among other things, they said.
The bill would have raised more than $3.4 billion from the nation's top 11 highest-paid CEOs alone in 2021, including $2.9 billion from Tesla and Twitter executive Elon Musk, Sanders said.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.
This article originally appeared on USA TODAY: Millionaires are done paying Social Security tax this year. Here's why
