President Joe Biden Has A Plan How To Fix Social Security Problem – Here’s How Biden Supports A Potential Solution

President Biden supports a potential solution on how to fix the Social Security problem.

President Joe Biden Has A Plan How To Fix Social Security Problem – Here’s How Biden Supports A Potential Solution (PHOTO: The Wall Street Journal)

The Social Security Problem

The Social Security program contributes more than $113 billion in benefits to 66 million Americans in May, and total outlays for the year are expected to surpass $1.3 trillion.

This makes Social Security the largest line item in the federal budget but the aging population has produced in Social Security problem that makes costs rise faster than income.

Social Security is mainly financed through a 12.4 percent payroll tax, split between employees and employers, up to the maximum taxable earnings limitation. The limit currently is at $160,200, but it rises annually to keep pace with changes in general wage levels.

Any income beyond the limit is not taxed for the purposes of the Social Security program. Hence, if you are earning $170,000 annually and pay the same amount in taxes as someone making $1.7 million per year.

According to the Social Security Administration, roughly 6 percent of employees have earnings above the maximum taxable limit in any given year.

While the total income attributable to those workers is rising, so the percentage of earnings subject to Social Security payroll tax is shrinking. In fact, it reached a 50-year low of 81.4 percent in 2021, meaning 18.6 percent of income was not subject to the Social Security payroll tax.

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President Biden has been consistent in promising to protect Social Security from benefit cuts, most recently in his 2024 federal budget proposal according to the Motley Fool.

Despite sparse details, Biden keeps repeating his commitment to ensuring the Social Security problems will be fixed by high-income people paying their fair share. Biden’s reform plan addresses the Social Security problem of income inequality by expanding the 12.4 percent payroll tax to all earnings over $400,000.

The plan would also create a hole between the current taxable limit of $160,200 and $400,000, but the gap would obtain less and eventually close as the taxable limit rises each year. All income would eventually be subject to Social Security payroll tax.