The tax system often feels unequal and Social Security is an obvious example. According to economics professor Teresa Ghilarducci, by the time most people celebrated the New Year, Elon Musk had already paid his Social Security taxes for all of 2025.
Just 15 minutes into the year, his obligation was complete and he paid all his Social Security tax on his earnings from Tesla. If all of Musk's income were taxed, he could have paid his Social Security tax for the whole year in just about one minute. In contrast, 94% of Americans will continue contributing to Social Security from every paycheck throughout the year.
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How Does That Even Work?
Social Security taxes are capped; for 2025, the maximum earnings subject to Social Security tax is $176,100. This means you pay the same maximum Social Security tax whether you make $176,100 or $176 million. For high earners like Musk, who makes millions in minutes, it's just a blip – barely noticeable compared to their vast incomes.
Meanwhile, year-round, Social Security taxes are deducted from every paycheck for the average worker making less than $57,000 annually. More than 164 million Americans must do this to keep the Social Security system running month after month. This glaring disparity illustrates how the system places disproportionate costs on people of different income levels.
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What Could Be Done?
Critics believe the system could be fairer if the tax cap was raised or removed entirely. If high earners had to pay Social Security taxes on all their income, as they do with Medicare, it could bring in a lot more money. In fact, if just 229 of the highest-paid people in the U.S. paid taxes on all their income, they would contribute more than 77% of all workers combined. Extending the system’s solvency for decades, this approach could fill the long-term financial shortages.
According to estimates, if the cap were eliminated, just 229 of the highest-paid Americans would contribute more than 77% of workers combined. This relatively small group of earners could profoundly reshape the Social Security landscape.
Some policymakers also suggest including other types of income, like capital gains, in the taxable base. This would ensure that wealth generated outside traditional wages contributes to the system, creating a more comprehensive and fair revenue base.
A Fairer Future?
Proposals like the Social Security Expansion Act suggest raising the cap to $250,000 and taxing investment income. Supporters of these changes argue that they would close Social Security's funding gap and allow for increased benefits. This could help reduce poverty among retirees and make the system more balanced.
If more income were taxed, Social Security could even afford to increase payments for retirees and ensure the program stays strong for decades. This surplus could eliminate poverty among retirees, making Social Security a stronger safety net.
Why it Matters
As the economics professor wrote for Forbes, if nothing changes, Social Security benefits are projected to drop by 21% in 2033 when the program's trust fund runs out. Such a reduction would be devastating for millions of retirees who rely on these benefits as their primary income source.
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