What really irks me is that $97K/yr is considered "the rich" (stated three times in the article cited). What I find laughable is that Mr. Edwards thinks that an income of $200K make one a millionaire.
It's the Social Security (F.I.C.A.) cap, so he is talking about individual earned income - that would be income from wages, salaries, self-employment, etc. Currently, you pay Social Security tax on the first $97,500 of earned income, and Medicare tax on all earned income. Increasing the cap has been mentioned before as a way to improve the fiscal standing of the program, but I have not seen a suggestion to lift the cap altogether before.
Once you reach the cap in a tax year, your employer is supposed to stop deducting FICA from your pay.
The easiest way to check if you are still being taxed is to check your paystub. FICA (Social Security) is 6.2% and Medicare is 1.45%. If you have reached the limit then there should be no withholding in the current check. You should have $6014 in the year to date amount, assuming that 97,000 is the current limit for withholding FICA. (sorry haven't worked in over 5 years and an not up to date on the limits)
It's $97,500 for 2007 according to SSA's website, so that would be $6,045. Of course, there is no cap for Medicare tax. On a side note, if you work for more than one employer and your total is over the cap, but your income from each of the employers is under the cap, they are both still required to withhold the FICA, and you can claim a refundable credit for the overage on your income tax return.
Thanks for the info and additional clarification. You are absolutely right about the refundable amount paid into Social Security. Also, most employers use a payroll service or program that has the limits programmed in, therefore they will/should automatically stop withholding.
If Soc. Sec. had been devised by a private citizen they would be in jail for fraud! It is a Ponzi scheme, pure & simple. There is no way in hell this country can tax it's way out of the mess SS has become.
I never heard about the cap before. I read recently that the average income was about 40K (can't remember if it was local or national). So the average person would have Social Security taxes taken from ALL their income and those who make triple what they do get a break? How is that fair?
You make a good point. However, the formula to determine how much SS you get after you retire is based on your earnings when you were working. Generally, when they raise the cap, they also change the formula so that higher income workers get more. Raising the cap helps some, because of the way the formula works, and I have heard that raising the cap by a few thousand dollars would keep the SS fund solvent for another 50 years. What Obama is proposing, apparently, is to remove the cap altogether, without changing the formula, which raises fairness issues.
