After Kisses on New Year’s Eve, 229 Americans Have Already Paid Their Social Security Tax
Fifteen minutes past midnight on New Year’s eve Elon Musk will have paid all of his Social Security tax on earnings from Tesla. If all of Musk’s income was taxed he would pay all his Social Security tax in about 60 seconds, maybe after one short kiss.
Alexander Karp, CEO of Palantir pays all his Social Security tax (OASDI) in about 19 minutes past midnight January 1; Hock Tan, CEO Broadcom and Brian Armstrong, CEO Coinbase, pay by 12:30 am — one champagne glass and two kisses. In the first few hours of 2025, over 229 U.S. workers earning over $50 million per year will have likely paid all their Social Security taxes for the entire year. (Only salaries from executives at public companies are disclosed so there are likely more rich executives at private companies who have paid all their Social Security within a half an hour of the new year.)
163 Million Americans Pay Social Security Tax All Year Long
In contrast, over 164 million workers (about 94% of us) pay Social Security taxes all year long. Why? We earn under $176,100 per year which is the cap on earnings taxed by Social Security. A civil engineer earning $176,100 per year is the same as Elon Musk in the eyes of the Social Security system. The point is a lot of income escapes the Social Security system; and the escaping-income that from the wealthiest Americans.
If we raised the cap on the maximum earnings subject to Social Security taxes, and included more income — interest, business receipts, capital gains — in the definition of earnings (like Medicare does), we could close the solvency gap. Taxing the expanded base could more than pay for promised Social Security benefits for 35 years and there would even be some money to eliminate poverty among all Social Security recipients.
Primer on Social Security Finances
The payroll tax for Social Security Old Age and Survivors’ benefits is 12.4% (statutorily split between employees and employers) and is assessed on earnings up to the earnings maximum (which increases every year,) In 2025 the cap is $176,100. In 2023 (the most recent figures) about 176 million Americans and their employers contributed $1.1 trillion (see Table 5) to the Old Age, Survivors, and Disability system in 2023.
If the cap for Social Security had not existed (there is no cap on Medicare taxes) the some 6% of U.S. workers who earn more than Social Security’s taxable maximum would contribute more than $388 Billion to Social Security. If the earnings maximum had been eliminated, just the handful of people — 229 + — earning over $50 Million a year would have paid $3.6 Billion in Social Security tax, which is more than 77% of American workers — earning less than $57,000 per year – paid in Social Security tax.
Let me repeat: 229 of the highest-paid Americans – if the law would change and they paid Social Security tax all year round – would pay as much tax as 77% of Americans.
If Congress and the President do nothing to find more revenue for Social Security, in 2033 Social Security benefits will suddenly drop by 21%.
To restore Social Security solvency decades past 2033, the tax rate could increase and/or the tax base could expand to include all income. Social Security’s deficit is expressed by how much the payroll tax must increase to pay promised benefits for 75 years. And that amount relatively small, just 3.62 percentage points (1.81 percentage points to each the worker and employer) so the tax increase would be fairly painless.
But I, and most of economists, agree a better, more efficient, solution is to expand the tax base by raising the earnings cap and expand the definition of income to include income from capital according to a report by the Congressional Research Service.
Legislation Can Make Social Security Solvent – FAST!
In the House of Representatives, Rep. John Larsen (Conn. D) has led proposals for years to expand Social Security benefits and revenues by expanding the tax base. In the Senate “The Social Security Expansion Act,” introduced by Senators Bernie Sanders (I-VT) Elizabeth Warren (D-MA) and Congresswomen Jan Schakowsky (D-IL) and Val Hoyle (D-OR) would raise the taxable earnings cap to $250,000, and like Larsen’s bill, include investment income.
Their measure would raise more money than needed to solve the long run deficit, so the Act uses additional revenue to increase Social Security’s benefits to eliminate most elder poverty. (The Office of the Chief Actuary of Social Security and Social Security Works, a nonprofit Social Security think tank, are good sources for updates on Social Security legislation.)
Political Hope for Social Security Fixes
There is hope. Republicans and Democrats, in December 2024, raised Social Security benefits for over 2 million people by repealing the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO).
The hope is that the bipartisan support for the expansion of Social Security benefits may mean Congress is listening to the majority of Americans – republicans and democrats – who want more revenue for Social Security and do not want benefit cuts.
The bad news is that recently House Republicans advocated cutting Social Security benefits by (about 8%) by raising the full retirement age to 69 and President – elect Donald Trump’s only Social Security proposal would drain Social Security of revenue by $23 Billion according to a report by the thorough Committee for a Responsible Federal Budget.
The Social Security Trustees wrote in the last actuarial report, lawmakers have all the options laid before them to eliminate Social Security’s long-term financing shortfalls and raise benefits. “Taking action sooner rather than later will allow consideration of a broader range of solutions.”
The quickest and most effective action to fix Social Security just might be to ask the small fraction of the highest income Americans, like Elon Musk and other wealthy Americans CEOs, to pay all year long.