Raising the Social Security Wage Cap Would Hurt Small Businesses

From The Heritage Foundation:

Groups such as the American Association of Retired Persons (AARP) have proposed to “fix” Social Security by raising the $90,000 cap on the amounts of salaries and wages that are subject to the Social Security payroll tax. Even if the 12.4 percent payroll tax rate remains untouched, raising the payroll tax cap would affect millions of small-business owners, slow economic activity, and cost jobs. That is a high price to pay for a proposal that would not even fix Social Security’s finances.[1]

Workers now pay Social Security payroll taxes on the first $90,000 of annual income. This cap on the payroll tax is indexed to the growth of real wages in the econ­omy and changes every year. For example, the payroll tax cap was $87,000 in 2003 and rose to $87,900 in 2004 and $90,000 in 2005. Any income earned over this amount is not subject to the 12.4 percent payroll tax that funds Social Security’s Old-Age and Survivors and Disability Insurance (OASDI) programs.