Did you make more than $176,100 this year? Did you tell your staff that you’re paying a lower Social Security tax than they are?
I remember the moment clearly. In Alabama, I found myself in a quandary on a particular payday in late November. All of a sudden, I was receiving a higher take-home salary, even though I had not received a pay bump. I went to our finance office, comprised of incredibly friendly, warm, and highly-skilled folks. There, the payroll person let me know that I had reached the Social Security cap and that’s why they weren’t taking it out of my pay any more. Clueless me — especially as the son of a CPA — I had never heard of the Social Security cap.
“Oh,” she said, “that’s probably because it never came up before.”
“So, what do I do?” I asked, looking at the paystub. “This doesn’t seem right.”
No one should pay less in Social Security taxes (by percentage) than anyone else, not even me. The whole point of the program is that everyone pays in the same and everyone benefits the same. And always remember, even Ayn Rand took Social Security (and Medicare, for that matter) benefits.
Today, the Social Security cap is $176,100. For every dollar earned up to that point by any employee, there is a Social Security tax of 6.2% paid by the employee and 6.2% paid by the employer (Self-employed people pay the whole tax of 12.4%.). For every dollar above the cap, however, the employee pays no tax, and there is no matching tax paid by the employer.
Why is there a cap? It’s been there since the beginning, in 1937, although until 1950, the cap number was $3,000 per year (the equivalent to a little over $40,000 today). The cap and low payments were part of a compromise made with conservative republican dickheads who may have decried Darwin as being anti-Christian, but held fast to using his “survival of the fittest” notion as a sociological cudgel intended to kill the poor, which is exactly what they must believe Jesus would have done, I guess.
Today, about 96% of wage-earning Americans are unaffected by the cap.
Which means, of course, that 4% of the 200 million American taxpayers are, or 8 million people. The cap is preventing upwards of $3.2 TRILLION from naturally becoming a part of the Social Security funds over a 10-year period. Those billions go right back to the highest wage-earners, who presumably buy their third island with it.
In today’s behemoth arts organizations, there are a number of leaders earning well more than that cap. I could take the time to point them out, because their 990s are public and available either via the IRS’s charity website, through Guidestar, or by requesting the data yourself (which, as we’ve related in September 2023, they are required to give you). And while those earning $400,000, $500,000, $600,000 or more might be embarrassed to reveal that information, the federal law states that no one may be prohibited from discussing salaries with anyone else within a company (because that practice only serves the employer, not the employee), even if they hold work agreements that say otherwise. (Just because something is in a contract doesn’t make it suddenly legal. Illegal stipulations are void. You didn’t know that?)
In fact, were you to look these organizations up (start with the ones with the biggest budgets, of course) and you were to list them in the comments beneath this article, that would be completely legal and a public service to the entire sector. If you need help with that, let me know (alan@501c3.guru).
If the cap were removed and everyone paid the same rate of Social Security — everyone — suddenly a whole bunch of money would flood into the Social Security system, closing the current gap by 53%.
The Heritage Foundation sees it differently (wow. what a surprise.). Those dickheads believe that if the cap were removed, the economy would be harmed.
They call it a tax “increase” rather than what it is, tax equity. They also say it would “reduce the family budgets of 23 million people” by over $9,000 in the first year alone. These arrogant douches don’t think anyone else can do the math. Any family with a $9,000 reduction in the first year (2025) would be earning $321,261.29 in wages. If you’re making $321,261.29 or more, you can afford the $9,000 haircut when it’s for the good of the country.
Social Security is highly popular. Over 90% of Americans support it and 94% accept it when they become eligible. Little Donny Dingdong and his cronies knows that abolishing it is an unpopular idea. So, he simply says that he’s protecting it; doing so, of course, while at the same time he’s holding its metaphorical head underwater.
How can I make this better? If you earn more than the cap, don’t stop donating to the fund through your payroll taxes and have the company match it, just like everyone else. Simple. Fair.
Know that most people do not know that there is a cap and that high-earners don’t pay as much into Social Security as a minimum wage earner. Rail against it with your company. Raise awareness and try to enact legislation in your state, or better, in your federal leaders.
Make the cult members in the current administration say out loud that they believe poor people should pay higher rates into Social Security than rich people. Make them say it.
It would not be lobbying to let people know where candidates stand on this particular cause, as long as you don’t add your endorsement. Ask the question at your next town hall.
For those newly-wealthy arts leaders who are part of the cadre of people who have traditionally been discriminated against in terms of pay equity (women, non-Whites, etc.), take a moment and do the right thing. Say out loud that this is wrong. It’s the kind of thing that makes it possible for your legacy to include the fact that while you may have broken through a glass ceiling, you didn’t stop and tape it up behind you.
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