20 hours Ago By Moneywise
As Social Security faces a looming solvency challenge, one proposal would boost its fortunes by making all wages over $400,000 subject to the payroll tax. A new survey suggests this “donut hole” option has wide support. looked at the opinions of adults in six swing states and found that this proposal, which would eliminate 60% of the shortfall, is supported by an overwhelming 86% to 89%.
Nationally, 87% of adults are in support. Car insurance premiums in America are through the roof — and only getting worse. But 5 minutes could have you Commercial real estate has beaten the stock market for 25 years — but only the super rich could buy in.
Here's how even ordinary investors can These 5 magic money moves will boost you up America's net worth ladder in 2024 — and you can complete each step within minutes. The most popular proposal in the survey nationally was reducing benefits for the top 20% of earners, which would eliminate 11% of the shortfall. The least popular was raising benefits for those 85 and over by about $100 a month.
Questions remain about the "donut hole" plan’s effectiveness and feasibility. Will this reform be the key to securing Social Security’s future? The “donut hole” refers to a gap in taxable income for Social Security purposes. Currently, the amount of income subject to Social Security payroll taxes is capped at $168,600 for 2024 and it will rise to $176,100 in 2025.
Earnings above this threshold are not taxed for Social Security. The proposed reform suggests reinstating the payroll tax on incomes exceeding $400,000, creating a gap — or “donut hole” — between the current cap and $400,000 where earnings remain untaxed. For high-income earners, this means that while their income between $168,600 and $400,000 would still be exempt, any earnings above $400,000 would be subject to the 6.
2% Social Security payroll tax. Employers would also contribute an additional 6.2%, as is standard.
This change targets the highest earners, aiming to increase revenue without impacting middle-income Americans. Social Security has long been a cornerstone of American retirement planning, providing benefits to retirees, disabled individuals, and survivors of deceased workers. But the program faces a significant funding shortfall: Trust funds that pay out retirement and disability benefits are projected to be depleted by 2035.
If no changes are made, beneficiaries could face a reduction in benefits of about 20%. What’s behind the looming insolvency? There are several reasons said to be contributing to spending exceeding revenue. The aging baby boomer generation is retiring, leading to a higher number of beneficiaries.
At the same time, birth rates are declining, resulting in fewer workers contributing to the system. And because people are living longer, that means people will receive benefits for an extended period and extend the program’s financial obligations. Slow wage growth limits the amount of payroll taxes collected, reducing the inflow of funds into the system.
The “donut hole” proposal addresses the gap by tapping the earnings of high-income individuals. By reintroducing the payroll tax for earnings above $400,000, additional revenue could be generated, extending Social Security’s solvency. The proposal has support from those who believe it fairly strengthens Social Security without burdening middle- and lower-income workers.
, which reintroduces taxes to earnings above $400,000 among other changes, was authored by Rep. John Larson and has nearly 200 Democratic co-sponsors in its current version. noted that presidential candidate Kamala Harris was a co-sponsor of a similar bill and her running mate Tim Walz was an original co-sponsor of Social Security 2100 during his time as a congressman representing Minnesota.
Rich, young Americans are ditching the stormy stock market — But there are hurdles. Tax increases, especially on high earners, often face opposition from conservative lawmakers and interest groups. And with a divided Congress, reaching a consensus on Social Security reform can be challenging.
Nevertheless, widespread recognition of Social Security’s impending insolvency may pressure legislators to act. The proposal’s focus on high earners could make it more palatable to the general public, potentially increasing its chances of passage. The funding gap entirely would require a combination of measures.
As the University of Maryland study mentions, the “donut hole” proposal could significantly trim part of the shortfall but it would need to be part of a broader reform package. Several alternative or complementary proposals are being considered to address Social Security’s financial challenges: Raising the retirement age: Gradually increasing the full retirement age would account for increased life expectancy but could face pushback from those who feel it unfairly impacts workers in physically demanding jobs. Adjusting the payroll tax rate: A slight increase in the payroll tax rate for all workers would generate more revenue but might be unpopular among lower-income workers.
Changing the benefit formula: Modifying how benefits are calculated, such as reducing benefits for higher earners, could help balance payouts with inflows. Means testing: Implementing means testing for benefits would but raises concerns about altering the universal nature of Social Security. The proposal’s fate will depend on the political will to enact changes that may be contentious but are crucial for the program’s longevity.
As the anticipated 2035 insolvency approaches, the urgency for reform intensifies. Whether through the “donut hole” proposal or a combination of strategies, action will be essential to ensure that Social Security continues to fulfill its promise to future generations. Cost-of-living in America is still out of control — , no matter what the US Fed does or says Lock in juicy quarterly income through this $1B private real estate fund — even if you’re not a millionaire.
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