In 2008, people who earn less than $102,000 will pay Social Security tax on their entire income. Those who earn more will pay Social Security taxes only on the first $102,000. Removing the cap and making all earnings subject to the Social Security payroll tax would increase revenue and make more money available to pay Social Security benefits.
- McCain on the Social Security Payroll Tax
McCain is opposed to raising the cap on the Social Security payroll tax.
During a Fox News interview in April 2007, McCain was asked if he could support extending Social Security taxes as part of a compromise to fix the system. He replied: “As part of a compromise, if you come up with a benefit, I can accept almost anything, but it's got to be part of a compromise. Am I for raising anybody's taxes? No, I am not. I am unalterably opposed to doing so. I will not support a tax increase; it's off the table, certainly, now.”
A month later, on Meet the Press, McCain said: “Am I opposed to tax increases? Yes. But we've got to sit down together and figure out what our options are, and tough decisions have to be made, Republicans and Democrats. And I know how to do that.”
- Obama on the Social Security Payroll Tax
Obama has made reforming the Social Security payroll tax the cornerstone of his approach to ensuring the solvency of the Social Security system.
Obama advocates removing the current cap on Social Security payroll taxes, which exempts all income above the first $102,000 each person earns. Obama argues that the system favors wealthy people, who should be paying a fair share to support Social Security, but he acknowledges a compromise may be needed to protect middle-class workers whose incomes are slightly higher than the current cap.
During the Democratic debate at Drexel University in October 2007, Obama said: “Social Security is not in crisis; it is a fundamentally sound system, but it does have a problem, long-term. We've got 78 million baby boomers, who are going to be retiring over the next couple of decades. That means more retirees, fewer workers to support those retirees. We are going to have to do something about it. The best idea is to lift the cap on the payroll tax, potentially exempting middle-class folks, but making sure that the wealthy are paying more of their fair share, a little bit more.”
And on Fox News Sunday in April 2007, Obama said: “In terms of raising the cap on the payroll tax, right now everybody who's making $102,000 or less pays 100 percent of payroll tax on 100 percent of their income. There are about 3 percent to 4 percent of Americans who are above $102,000 in income every year. So if you want to talk about who's middle class, me giving cuts to folks making $60,000 or $70,000, and potentially asking more from friends of mine like Warren Buffett. That's a debate I'm happy to have with John McCain, because it's the people making $75,000, $50,000, $60,000 who are hurting."
Obama views raising the cap on the payroll tax and ensuring the integrity of the Social Security system just one part of a comprehensive plan to help make seniors more financially secure.
Obama says he would also:
- eliminate income taxes for seniors earning less than $50,000 per year,
- protect pensions by reforming corporate bankruptcy laws and requiring full disclosure of pension investments,
- and automatically enroll workers in company pension plans (they would be free to opt out at any time).
In addition, Obama wants to expand incentives that would encourage working families to save for retirement, and make it easier for seniors to stay employed if they can’t afford to retire or prefer to continue working past traditional retirement age.