Why Wealthy Americans Are Already Paying 2025 Social Security Taxes!

Just After Midnight on New Year’s Eve: 229 Americans Have Already Settled Their Social Security Tax Bills

Did you know that any income over $176,100 a year escapes the grasp of Social Security taxes? That’s right! A civil engineer making that amount is treated the same as Elon Musk by the Social Security system.

Imagine this: at just 15 minutes past midnight on New Year’s Eve, Elon Musk has likely already fulfilled his Social Security tax obligation from his Tesla earnings. If every dollar he made were taxed, he could settle his Social Security dues in the blink of an eye—about 60 seconds flat!

Consider Alexander Karp, the CEO of Palantir—he probably pays his Social Security tax in about 19 minutes after midnight. Hock Tan of Broadcom and Brian Armstrong from Coinbase may have finished theirs by around 12:30 a.m. In those first few hours of 2025, over 229 high-earners pulling in above $50 million annually will have likely paid their entire Social Security tax for the year. And remember, we only see the salaries of public company executives, so there are undoubtedly more wealthy executives in private firms who are wrapping up their Social Security dues just as quickly!

A Staggering 163 Million Americans Pay Into Social Security Year-Round

In stark contrast, nearly 164 million workers—about 94% of us—are diligently paying Social Security taxes throughout the year. The reality is, a vast amount of income is slipping through the Social Security net, primarily that of the wealthiest Americans.

If lawmakers were to lift the cap on earnings subject to Social Security taxes and broaden the definition of taxable income to include things like interest and capital gains (the way Medicare does), we could significantly close the solvency gap. By taxing this expanded base, we could secure Social Security benefits for the next 35 years and even combat poverty among all Social Security recipients!

Understanding the Finances of Social Security

Currently, the payroll tax for Social Security Old Age and Survivors’ benefits stands at 12.4%, split between employees and employers, and applies to earnings up to the annual limit—which rises each year. For 2025, that limit is set at $176,100. In 2023, approximately 176 million Americans and their employers contributed $1.1 trillion to the Old Age, Survivors, and Disability system.

If there were no cap on earnings for Social Security—unlike Medicare taxes—those 6% of U.S. workers earning above the taxable maximum would contribute over $388 billion. Just the top earners—slightly more than 229 people making over $50 million a year—would pay a staggering $3.6 billion in Social Security tax—more than what 77% of American workers earning under $57,000 contribute!

Let’s reiterate this key point: If these top earners were required to pay Social Security taxes all year long, they would match the contributions of 77% of Americans!

If Congress remains inactive on finding new revenue streams for Social Security, by 2033, Social Security benefits are set to drop by a shocking 21%!

Restoring Social Security’s solvency long past 2033 could involve increasing the tax rate or expanding the tax base to cover all income. The deficit is calculated based on the payroll tax increase required to fund promised benefits for 75 years, and surprisingly, the needed increase is just 3.62 percentage points (split equally between workers and employers). The good news? Such an increase would be relatively painless!

But most economists—including myself—agree that a smarter solution involves broadening the tax base by raising the earnings cap and including capital income in the mix, as highlighted in a Congressional Research Service report.

Legislation is Key to Securing Social Security

In the House, Representative John Larson (D-Conn.) has been a champion for years in pushing proposals to broaden Social Security benefits and revenue by expanding the taxable base. Meanwhile, in the Senate, the “Social Security Expansion Act,” spearheaded by Senators Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.) along with Representatives Jan Schakowsky (D-Ill.) and Val Hoyle (D-Ore.) aims to boost the taxable earnings cap to $250,000 and include investment income as well.

The beauty of this initiative is that it would generate more funds than necessary to tackle the long-term deficit, allowing for additional revenue to enhance Social Security benefits and significantly reduce elder poverty. (Stay updated on legislative progress through the Office of the Chief Actuary of Social Security and organizations like Social Security Works.)

A Ray of Hope for Social Security Solutions

Hope is on the horizon! In December 2024, bipartisan efforts led to an increase in Social Security benefits for over 2 million individuals by repealing the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO).

This bipartisan support for enhancing Social Security benefits signals that Congress is paying attention to the vast majority of Americans—Republicans and Democrats alike—who favor boosting revenue for Social Security without compromising benefits.

However, there’s a concerning trend: recently, House Republicans have proposed an 8% cut to Social Security benefits by raising the full retirement age to 69. Furthermore, President-elect Donald Trump’s only Social Security proposal threatens to strip $23 billion from its budget, according to thorough assessments by the Committee for a Responsible Federal Budget.

The Social Security Trustees have emphasized, in their latest actuarial report, that lawmakers have a plethora of options available to eliminate long-term financing gaps and enhance benefits: “Acting sooner, rather than later, will open the door to a wider array of solutions.”

The most effective and straightforward solution to stabilize Social Security may just be asking a small fraction of the wealthiest Americans—like Elon Musk and other high-powered CEOs—to contribute year-round. It’s time for change, and the road to a sustainable future for Social Security begins now.