Skip to main content

Sign up for our newsletter.

Quality journalism. Progressive values. Direct to your inbox.

Social Security is projected to have a shortfall in the medium term and many argue that the program, despite its importance, needs to be cut today. (Photo: Reuters)

Social Security is projected to have a shortfall in the medium term and many argue that the program, despite its importance, needs to be cut today. (Photo: Reuters)

A Late Valentine? Millionaires Stop Paying into Social Security on February 18th

The burden of Social Security taxes falls more heavily on those who make less

By February 18th, someone making $1,000,000 in 2019 will have stopped paying into Social Security for the year. Social Security, which provides retirement, disability, and survivor benefits to countless Americans every year, only taxes the first $132,900 of a salary (up from $128,400 in 2018). If you make more than this cap, that income is not subject to the tax.

Most people in the United States make less than $132,900 per year, so they will pay the 6.2 percent payroll tax every time they get a paycheck in 2019. Those who make over $132,900 get a break on any income above that amount.

If a person made $50,000 in 2019, for example, they’d pay taxes until December 31st — and have an effective tax rate of 6.2 percent. But someone making $1,000,000 in 2019 would stop paying Social Security taxes on February 18th and see a bump in their pay afterwards. This person’s effective tax rate would be just 0.8 percent. The burden of Social Security taxes falls more heavily on those who make less.

Social Security’s finances also depend on the tax cap. Social Security is projected to have a shortfall in the medium term and many argue that the program, despite its importance, needs to be cut today. Part of this shortfall is because more money has been shifted above the $132,900 cap over the last few decades: in 1983, 10 percent of wage income was over the cap; in 2016, over 17 percent was. This change represents a large share of the shortfall.

Scrapping the payroll tax cap entirely and making everyone pay the same tax rate, together with modest changes to the program (or a shift in perspective from deficit politics), could eliminate the shortfall entirely and allow for expanding benefits, which are as necessary as ever.

To better illustrate these points, CEPR has updated the calculator below (also available here) which shows the last day when salaries, if spread evenly throughout the year, are subject to Social Security taxes.[1] It also displays how much taxes are levied based on current law, and how much would be levied if the payroll tax cap were scrapped.

Salaries which might be interesting to enter into the calculator are:

$35,000: This is around the median annual earnings of an individual in the United States. (The vast majority of earnings at the level is wage income.)

$10,000,000: This is income at which Representative Alexandria Ocasio-Cortez’s proposed 70 percent marginal tax would take effect.

$1,500,000 and $21,800,000: This is the estimated wage income of billionaire Howard Schultz, former CEO of the coffee chain Starbucks. Although no longer CEO of Starbucks, he was on track to receive a similar salary in his retirement. His last known salary totaled $21,800,000 (with a $1,500,000 base salary). Schultz is in the news as he recently decided to explore running for president in 2020. Schultz has, in the past, distinguished himself with his focus on deficits and debt. Part of this focus has included cuts to Social Security and Medicare.

Check out the calculator here.


This work is licensed under a Creative Commons Attribution 4.0 International License

Kevin Cashman

Kevin Cashman lives in Washington, D.C., and researches issues related to domestic policy at the Center for Economic and Policy Research. Follow him on Twitter: @kevinmcashman or read his blog here.

We've had enough. The 1% own and operate the corporate media. They are doing everything they can to defend the status quo, squash dissent and protect the wealthy and the powerful. The Common Dreams media model is different. We cover the news that matters to the 99%. Our mission? To inform. To inspire. To ignite change for the common good. How? Nonprofit. Independent. Reader-supported. Free to read. Free to republish. Free to share. With no advertising. No paywalls. No selling of your data. Thousands of small donations fund our newsroom and allow us to continue publishing. Can you chip in? We can't do it without you. Thank you.

Biden Praised for $15 Minimum Wage Hike for All Federal Workers

"Setting a new $15 per hour wage floor for federal government work will encourage employers across the country who are currently paying poverty wages to compete for labor and start paying fairer rates."

Brett Wilkins ·


Sotomayor Excoriates Majority for 'Egregious' Attack on Texas Women

"This case is a disaster for the rule of law and a grave disservice to women in Texas, who have a right to control their own bodies," said the justice. "I will not stand by silently as a state continues to nullify this constitutional guarantee."

Julia Conley ·


Saudi Bombings Kill Scores of Civilians—Including Children—in Yemen

"America is complicit in this," said one critic of "this horrific war that Biden and his senior officials once promised to end."

Andrea Germanos ·


US Risked Killing Thousands by Bombing Syria Dam on 'No-Strike List'

"The number of casualties would have exceeded the number of Syrians who have died throughout the war," said a former director of the Tabqa Dam.

Kenny Stancil ·


'Atrocious': Biden Renominates Chevron Lawyer First Chosen by Trump

Human rights attorney Steven Donziger noted that the president's pick for the federal bench "was paid millions... to help jail me, attack Indigenous peoples, and cover up a massive oil spill in the Amazon."

Jake Johnson ·

Support our work.

We are independent, non-profit, advertising-free and 100% reader supported.

Subscribe to our newsletter.

Quality journalism. Progressive values.
Direct to your inbox.

Subscribe to our Newsletter.


Common Dreams, Inc. Founded 1997. Registered 501(c3) Non-Profit | Privacy Policy
Common Dreams Logo