Should the cap on Social Security be removed?

Social Security Cap
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Introduction
The Social Security Fund has served to keep a large number of the elderly population and seniors out of poverty since its official enactment in 1935. Presently as the baby boomers begin to retire or near retirement, there is a boiling crisis of the fund, and recent questions surround the sustainability of the Social Security to finance future generations of retirees. The financial crisis facing the social security fund is that in 15 years, it will incur fewer finances than what is needed to pay retirees. And in 30 years, the social security will only cover 75% of consumers for every dollar of allowances and benefits it has promised to the retired workforce. Indeed, these trends point that in 2075, the social security fund will operate an annual deficit of 570 billion as par the 1998 inflated dollar. In response to this looming crisis, the Congress has taken more stringent measures (Huffington, 2017). One of them is to raise the highest amount of taxable income and the other is to increase the total payable social security taxes. The above cap on social security will enable the US government to sustainably finance future generations of retirees – alongside keeping the economy in a relatively stable state. However, despite the promises of raising the total taxable income to boost social security taxes, a fundamental question that lingers is; should the cap on social security be scrapped?
Before embarking on this pressing financial and economic concern, it is important to note the first option of increasing payroll tax rates was previously called off by Bill Clinton and later confirmed by the head of the Social Security Administration Mr.

Kenneth Apfel. What currently remains is an open debate and a heated controversy over raising the wage income subjected to the social security tax. The central objective of raising the amount of payroll subjected to the tax is to restore the social system to full solvency. This change will require eliminating the wage cap and subject labor incomes to the social security taxations. Financial analysts project that eliminating the cap would only serve to delay the solvency time by pushing the financial sustainability of the security system to only a few years ahead. More clearly, instead of hitting solvency in 2013, this move will ensure the social security fund remains relevant and sufficient till 2019.
The Backsides of Removing the Social Security Cap
The move to remove the cap bears negative consequences. It would be the largest increase in US tax in history, subjecting thousands and millions of homeowners to massive payout taxes. This move would also impair the prospects of Americans and thus harm their employment and job opportunities. The cap elimination policy would further impair the domestic budgets of 23.4 million Americans by an approximate $9,148 in the first year alone. It would increase the marginal Federal effective tax rate by over 50% which is the highest payable taxes since the 1970s. The move to eliminate the cap would not save the social security system from a possible collapse. Rather, it would derail the sustainability threshold by only 7 years. This means it would solely push back the solvency time from 2013 to 2019 as opposed to providing a long-term financial solution to American populations. Analysts further estimate and project that it would affect employability by reducing jobs by 218,000 slots and further reduce the amount of income savings by approximately $24.3 billion.
Further projections point that scrapping the social cap would subject 6.9 million households to $425.1 billion increase in payable taxes. This means that over 24.3 million people living in these households will be affected including 6.2 million couples and 7.7 million labor workers. An additional 1.4 million single persons would see their payrolls dwindle and on average, the affected households will experience a tax boom of $9146 in the first year alone. Further statistics show that removing the cap of social security taxes bears two fundamental implications to families. One, the amount of disposable income would shrink and contributions to charities and similar organizations would be impaired. The US Department of Labor estimates American families with labor incomes of over $90,000 annually utilize a disproportionate amount of insurance purchases, give charitable contributions, and invest heavily in pension bonds. These fundamental investments are made after families purchase crucial necessities as clothing, shelter, and food. This implies efforts to remove the social security cap will impair this discretionary income spend on charity. It will further affect the amount spent on private retirement bonds and savings.
The Merits of Capping the Social Security
In 1983, the social security cap was set to cover 90% of all taxable labor incomes. During this time, analysts estimated that adjustments in taxable income would continue to service the 90% of wages. Increased income inequalities in recent times mean that the social security only covers 84% of the existing or present tax wages. In 2014, analysts revealed that raising the wage income gap to approximately $180,000 would restore the initial 90% of covered wages. Capping the social security would serve to increase the volume of households protected by the fund. The survivors, those experiencing old age, and individuals suffering from disabilities will sufficiently be covered by the cap. More money generated as a result of this contentious policy means only a little amount of finances will be borrowed, from within the economy and outside, to cater for discrepancies in retirements allocations. By capping the social security fund, the State will have adequate finances to meet the needs of retirees without necessarily having to borrow. Presently, the security tax for employers and employees is 6.2% and in 2017, the maximum income subject to the taxation was $127,200 (Frankel, 2016). The above figure translates to a maximum tax of $7886 for every person. With increases in the cost of living adjustment denoted as COLA, sources identify that capping the social security is pertinent at the face of rising wages in the US labor market. The need to cap the social security is a consequence of rising wages and income levels within and across the United States. Indeed, this means the 7.3% increase in social security taxes represents a two-year worth of income growth (Frankel, 2016). Hence, a major advantage of increasing the cap in social security is to keep pace with recent income trends in the American labor markets.
Assessment of Perspectives and Personal Opinions
It is worth noting the decision to remove the security cap or not depends primarily on what consumers feel about both regressive and progressive taxes. From a personal viewpoint, the biggest concern by the Congress and the populations at large is to keep the extra income or discretionary expenses secure and free from absorption by loose Federal administrations. An assessment of the claims further shows that removing the cap would derail economic growth and affect available job opportunities by increasing payroll taxes paid to the social security system. This scenario will most likely dwindle family savings, affect the amount of discretionary income and lead to a slowdown in the growth of family and domestic compensations. The removal of the cap sends a bad economic impression as it threatens employment and job opportunities by 0.1% through the elimination of approximately 219,000 job opportunities (Huffington, 2017). It is a personal conviction that the Congress decision to remove or restore the social security cap should be based fundamentally on corresponding increases in labor incomes. Through this consideration, it is possible to restore the fund’s solvency and the American financial sustainability without necessarily having to affect household incomes and discretionary expenses of individuals.
Conclusion
The analysis identifies that capping the social security fund has fundamental downsides. It would necessitate an economic slowdown, impair job opportunities, reduce family and household savings, and would not necessarily save the social security system from a possible solvency and collapse. The move would further result in the biggest tax increase in the United States history to $425.1 billion payable every year by individuals and families. On the flipside, restoring the cap will sustain the solvency of the social fund and extend the duration by approximately 7 years. This means the federal government and the State will be in a position to cover 90% of households and individuals in areas of needs like disability, old age, and other vulnerabilities likely to occur as a consequence of retirement. The analysis identifies the decision to cap or not depends majorly on what consumers, the employed, and employers feel about regressive and progressive taxations. A central concern of priority is to prevent the loss of discretionary income which means restoring and preserving the cap to shield individuals from unnecessary tax increases. In this realization, the government should consider alternative means of social security funding.
References
Frankel, M. (2017). There’s a Big Challenge Happening to the Social Security. The Business Insider. Retrieved from http://www.businessinsider.com/maximum-social-security-tax-2017-2016-12?IR=THuffington. (2017). Should the Cap on Social Security Payroll Taxes be Removed? The Huffington Post Official. Retrieved from https://www.huffingtonpost.com/moneytips/should-the-cap-on-social-security-payroll-taxes-be-lifted_b_8157982.html