A Social Security tax rate hike may cost Americans up to $3,000 a year

Raising taxes is one of many proposals politicians and economists have suggested to prevent Social Security benefit cuts in six years, but that plan could cost a typical American up to $3,000 in annual wages, a new calculator shows.

The trust fund that supplements incoming payroll taxes to pay monthly Social Security benefits is projected to be depleted in the last three months of 2032, which would force an immediate across-the-board 22% benefits cut, the latest Board of Trustees report said. To fill the expected funding gap, some politicians and economists are entertaining an increase in the current 12.4% Social Security payroll tax rate, split equally between employer and employee, on earnings up to $184,500 in 2026.

Depending on what the new payroll tax rate target is and assuming no other actions would be taken to shore up Social Security, the median full-time worker earning $61,583 a year would face between $2,617 and $3,024 in additional taxes, according to a report from the Cato Institute, a libertarian think tank. Social Security trustees estimated this year a payroll tax rate of 16.65% would be needed to close the funding gap, while the Congressional Budget Office (CBO) assumed last year that a…

Original source: https://www.usatoday.com/money/