Increase the maximum taxable earnings cap on the Social Security payroll tax.

The Idea:

Social Security is largely financed by a payroll tax on employees, employers and the self-employed. Only earnings up to a specified maximum, however, are subject to the tax. That maximum, which was $128,400 in 2018, automatically increases each year by the growth of average wages in the economy.

This means if you earn $128,400 or less, 100% of your income is subject to social security taxes.

If you earn 200,000, only the first $128,400 is taxed - 64% of your income.

If you earn $256, 800, only the first $128,400 is taxed - 50% of your total income.

Instructions:

Please consider the following proposal for changing taxes. Please provide an analysis of this proposal. First explain what you consider to be the advantages and disadvantagesof enacting this measure. What are some reasons why it would be a good idea to enact this? Are there any drawbacks or reasons why you would not want to enact this?