Elon Musk Stopped Paying His Social Security Taxes Just Four Minutes Into The Year — Here's Why That's A Problem For You

A post on Threads in January pointed out a major issue with the Social Security system: Elon Musk stopped paying into it just four minutes into the new year. This happened because he made $168,600 quickly, hitting the wage cap on contributions. This example shows a bigger problem: the cap on Social Security taxes lets the wealthiest avoid paying their fair share.

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In the first few hours of 2024, more than 220 U.S. workers will have paid all their Social Security taxes for the year. Meanwhile, over 160 million workers will keep paying throughout the year. This difference highlights the imbalance in how Social Security contributions are structured. Most Americans pay into Social Security year-round, but the richest stop early in the year.

The current system means massive income from the wealthiest escapes taxation. According to a report from The Institute for New Economic Thinking, if the cap were removed, it could add over $22 billion a year to the Social Security Trust Fund. Advocates say raising the cap on taxable earnings and including more types of income would secure Social Security benefits for decades and potentially end poverty among beneficiaries.

A 12.4% payroll tax funds Social Security, split equally between employees and employers. This tax applies only to earnings up to a certain limit, which was $160,200 in 2023 and $168,600 in 2024. According to the Institute for New Economic Thinking report, capital gains and other non-wage income are not taxed at all.

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This isn't just about numbers; it's about fairness. Economist Teresa Ghilarducci points out that while the wealthy pay less, ordinary workers bear a heavier burden. For instance, a millionaire's effective Social Security tax rate can be less than 1%, compared to the 6.2% paid by regular workers.

Concerns about Social Security running out of funds are widespread. According to reports, the Social Security Trust Funds may be depleted by 2035, reducing the ability to pay full benefits. If no changes are made, the system can only pay about 77% of scheduled benefits from that point onward.

A survey by Data for Progress shows that 71% of likely U.S. voters support increasing taxes on wealthy Americans to ensure Social Security's solvency rather than cutting benefits. Legislative proposals like Rep. John Larson's Social Security 2100 Act aim to fix these disparities by taxing annual earnings above $400,000, ensuring that the wealthiest contribute more fairly to the system.

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