Meet the people who are so rich they’ve already paid their 2014 Social Security tax

This is turning into Michael Hiltzik week. Couldn’t happen to a nicer writer. (For the first installment, click here.)

So you know that there are lots of kinds of taxes, right? And that in addition to the other taxes on income — federal income tax, state income tax — there’s also a Social Security tax and a Medicare tax, also on income, or more precisely, on wages.

All of the above taxes are on all income, or all wages, except one — the Social Security tax. Unlike all the other taxes on income and wages, the Social Security tax is subject to a “wage cap,” a dollar amount over which the tax isn’t applied. This year that number is $117,000 (it increases slightly every year). A couple of things to note about this:

Social Security

Social Security via Shutterstock

▪ Most people don’t know there’s a wage cap on the SS tax because most people don’t reach it. They just don’t make that much. Most people pay Social Security tax all year, right to the end. Every paycheck has SS tax deducted. Unless your income increases because of a raise, the combined SS tax and Medicare tax (called “FICA” on your pay stub) never changes.

▪ As a result, this special tax break for high-wage types is hidden from most people. What you don’t know about, you can’t complain about.

▪ High-wage people know about the cap though, because sometime before December 31, their take-home pay changes. On a certain date, their accumulated yearly wages hits the magic number (the cap) and then their after-tax pay suddenly increases by more than 6% — a big jump for most of them. Almost all of these people remember that day, because they suddenly have more spending money, and they’ll have that money for whole rest of the year.

▪ Many people with incomes higher than the wage cap even celebrate that day — go out to dinner or something and spend a few of those extra dollars. Who wouldn’t?

Which means:

▪ The higher your wages, the earlier in the year you stop paying Social Security. Call it your personal Tax Freedom Day.

So when is your personal Tax Freedom Day? When does your income hit the SS wage cap? Never? On December 15? December 10? November 1? How about on July 12? How about earlier?

For some people, that day is very early. For some people, about 900 of us, Tax Freedom Day comes on January 2, just two days into the new year. Hiltzik (my emphasis and paragraphing):

Call them the 900: The Americans who will meet their 2014 payroll tax obligations for Social Security as of … Day 2 of the New Year. They’re an impressive group and very elite, bless their hearts: To have earned the maximum taxable wage for Social Security in 2014 ($117,000) in two days, one’s annual income has to exceed about $21.3 million.

The Social Security Administration says that in 2012, the latest year for which it has figures, 894 wage-earners collected more than $20 million, which is as narrowly as it slices the data. They’re not the 1%, or even the .01% — they’re the .0001%. It’s a group heavily populated by corporate CEOs.

There’s more in the article, well worth a full read. For example:

With the cap removed for top earners, she wrote, “the Social Security system would be solvent indefinitely and they still would be the richest and prettiest in all the land.”

Removing or raising the cap would also help redress an inequity that has crept into the program since the payroll tax was last reconfigured in 1983. The tax increase then — to 12.4% of payroll up to the cap, divided equally between employer and employee — covered 90% of all taxable wages, according to Social Security actuaries.By 2009, it covered only 84%, largely due to the sharp run-up in the incomes of the highest-earning taxpayers [i.e. the rise in income inequality].

These people, the “900,” are part of the “1% of the 1% of the 1%”. (That group also includes hedge fund managers as well as others who never pay SS tax on their earnings.) The 900 are part of the ruling class, and every CEO who earns above $21 million is in it. From another piece on the same subject:

Of the 894 individuals, 70 were executives from corporations like Starbucks, ComCast, Pfizer, Philip Morris and NewsCorp.

Yep, the “900″ includes that nice man who runs Starbucks for you, and almost certainly included that far-seeing lover of humanity who runs the Google, before he retired from CEO to the Board of Directors to pull down a mere $7.5 million a year. Heck, three of the Senior VPs at the Google pulled down a whole lot more — one of them a cool $51 million. They’re in the “900 club” as well. 

You want to check for yourself which proud member of the CEO class is on the list? Click here and browse away.

I’d love to get a list of those 900 names but I can’t without a ton of research. Yet these are the people who matter, they and their billion-dollar-income hedge fund friends. These are our rulers, your lords and masters. They write the checks in this country, the real checks — checks to you and me as wages, checks to millionaire athletes, checks to our political leaders to finance their campaigns and careers. 

Which means that, in the aggregate, these people write our laws — laws that guarantee they stay effectively untaxed, laws that guarantee that most of our political leaders can’t have careers without them.

900 people pay their entire Social Security tax in two days of work or less. Now these are a big-time job-creators, wouldn’t you say? And if you wonder where all those jobs get created, just turn west and look across the blue Pacific. You’ll find nearly all of them.

Thanks, Mr. Hiltzik. Nice catch.

GP

To follow or send links: @Gaius_Publius


Gaius Publius is a professional writer living on the West Coast of the United States. Click here for more. Follow him on Twitter @Gaius_Publius and Facebook.

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  • Shirted

    Really? That’s not been any group of friends that I know. We just take turns.

  • dumbass

    If nine people are sitting at the bar with empty wallets looking for a drink, and one guy at the end of the bar still has money, they take a vote and majority says the guy on the end gets to buy the next round. Who’d figure????

  • Andrew Ekleberry

    This is why socialism never works. See, as a Capitalist, my view is that we should encourage people to save and invest, and work at growing their value to the market, so that they can retire a millionaire, and be able to keep more of their own rightfully owned money. In that spirit, I want people to pay LESS taxes, so they have more of THEIR OWN WEALTH.

    What the leftists, and Socialists say, is not to build people up, but rather tear them down. Lets make more people pay even more tax, and be less wealthy. This is why every country that goes down this ideological path, always ends up more impoverished.

    See, I make $20K a year…… today. I, like most people, hope to earn more later in life. How does screwing over other people with higher taxes help me? It doesn’t. But when I earn more money later in life, that tax break will benefit me, just as it benefits wealthy people today. If you remove that tax break, it won’t benefit me today, and it will harm me tomorrow. Zero benefits, plenty of harm. Why should I be upset it something that is a benefit, that removing it would only harm?

  • Nathanael

    “What is their actual skill?”
    Fraud. It’s hard to commit fraud effectively! These bazillionaires are mostly very good at committing fraud.

  • ComradeRutherford

    The ONLY argument against raising or eliminating that cap on SS taxes is to justify gutting or eliminating SS because it’s ‘going to run out of money.’

  • Bill_Perdue

    I couldn’t trace it but if memory serves It came from links.org.au and if that’s correct then it’s ok to save it and use it. You might want to check out http://links.org.au/node/3664

  • GaiusPublius

    Bill, where did you get this image? Is it copyright-protected? If not, I’d be tempted to use it myself. Thanks for what you add to these discussions.

    GP

  • Whitewitch

    I didn’t know that…will have to check it out. All I do know is that I have a wealthy family member that has more than enough money, has been retired for a very long time and goes on and on about how he will “raise hell” if they try to take his social security…and believe me he does not need it (I suspect he uses it as toilet paper so he doesn’t have to wipe like the rest of us). So I suspect they would insist the cap should be raised.

    Thanks for giving me something to check out Karey.

  • Bill_Perdue

    You’re uniformed. I provided one link and here are two more.

    http://truth-out.org/news/item/19912-obama-wants-to-cut-social-security

    http://www.theatlantic.com/business/archive/2013/04/reality-check-obama-cuts-social-security-and-medicare-by-much-more-than-the-gop/274919/

    Unless you think there’s a vast leftwing conspiracy to be mean to Obama and have grudges against him you might want to read them. What I said about Obama is true. The proof is conclusive.

    Lots of people honestly claim that Democrats and Republicans have the same policies on most questions. You can’t honestly claim we’re wrong.

    There is only one party in the United States, the Property Party … and it has two right wings: Republican and Democrat. Republicans are a bit stupider, more rigid, more doctrinaire in their laissez-faire capitalism than the Democrats, who are cuter, prettier, a bit more corrupt — until recently … and more willing than the Republicans to make small adjustments when the poor, the black, the anti-imperialists get out of hand. But, essentially, there is no difference between the two parties. Gore Vidal

    Democrats and Republicans will try to gut Social Security and drive down the wages or working people. something they’ve been doing since Carter. Socialists will reverse that trend, tax the rich out of existence, and make democracy real by creating an economic and political democracy, a workers state.

  • Karey Jean Smith

    That’s simply not true about the president Bill_Perdue, nor can you honestly claim the Democratic and Republican parties are twins. As for why the presidents are laughing, probably because they are having their photo taken, duh.

  • Karey Jean Smith

    No you don’t. Social Security benefits are only calculated on the first $1,000,000 of benefits, anything over that doesn’t change the benefit amount paid to you at all. Right now if an individual pays in the full $117,000 a year (up to the cap) they absolutely do not get a benefit of $9,750 on retirement.

  • Karey Jean Smith

    That is only true up to $1,000,000 in income… anything above that, whether $10 dollars or $10 million dollars, does not change the amount of Social Security retirement benefits paid out.

  • Supookeed8087

    мʏ ғʀιɛɴɖ’ѕ ѕтɛք-мօтнɛʀ мαĸɛѕ $62/нʀ օɴ тнɛ ʟαքтօք. ѕнɛ нαѕ вɛɛɴ աιтнօυт աօʀĸ ғօʀ ɴιɴɛ мօɴтнѕ вυт ʟαѕт мօɴтн нɛʀ քαʏƈнɛƈĸ աαѕ $12864 ʝυѕт աօʀĸιɴɢ օɴ тнɛ ʟαքтօք ғօʀ α ғɛա нօυʀѕ. ƈнɛƈĸ тнιѕ ѕιтɛ օυт http://makesupto60dollarsperhour&#46qr&#46net/nHBl

  • cole3244

    i would do what the gopers do, remove the cap on that ss tax but keep the cap on benefits let them see how the other half lives, anything can be done if the will is there.

  • Bill_Perdue

    Socialists generally propose draconian taxes on the rich along the lines of a 100% tax on all income from any source (1) per year. We think that if the rich try to hide their income and wealth by parking it overseas all of their family wealth should be confiscated.

    (1) That should exclude the income derived by the sale or inheritance of the homes of working class people.

  • Silence DoGood

    An explanation of how to save out of poverty. Any commentary would be much appreciated. Good luck

    https://www.youtube.com/watch?v=nVat9VBsSCg&feature=c4-overview&list=UUh3B6Znt_L6Ck3SbqVDc6eA

  • Bill_Perdue

    A tiny few, not enough, members of Congress are against gutting Social Security, or more realistically, afraid of the backlash if they do. Obama is not afraid. He wants to gut our standard of living and always has.
    http://www.nakedcapitalism.com/2013/11/obama-wants-to-cut-social-security.html

    Gutting our standard of living is his job and the job of every Quisling in the Democrat and Republican twin parties of capitalism.

    Why are these men laughing?

  • Bill_Perdue

    It’s $7.7 trillion dollars (or more). They got it from the same Fed/Council of Economic Advisers, with many of the same players that served Clinton and Obama (and whose cousins served Bush).

    In a story that sheds new light on the extent of the country’s financial crisis, Bloomberg Markets magazine reported today that the Federal Reserve lent trillions of dollars to beleaguered financial institutions, with $1.2 trillion going out on just one day in 2008.

    “Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse,” Bloomberg reported.

    Fed Chairman Ben Bernanke had argued back in 2008 when the crisis hit that revealing borrower details would create a stigma that would have led to more banks collapsing. And the Fed fought to keep the details of the loans, which totaled $7.77 trillion, secret long after.”

    The system is rigged by Democrats and Republicans acting as political prostitutes for the rich.

    http://abcnews.go.com/blogs/business/2011/11/fed-gave-banks-trillions-in-bailout-bloomberg-reports/ http://abcnews.go.com/blogs/business/2011/11/fed-gave-banks-trillions-in-bailout-bloomberg-reports/

  • http://heimaey.us/ heimaey

    I’m not the fed, I can’t print money.

  • perljammer

    The percentage of individuals who surpass the cap is not 1%. It is at least 5%, and probably higher than that — as was pointed out earlier, only wages are taxed for Social Security, not income from other sources such as capital gains, interest, dividends, etc. I could not find any data for wage distribution, only income; the income data says that an income of $117,000 puts you in about the top 5%. Excluding non-wage income would make that percentage number larger, but I don’t know by what amount.

  • http://www.rebeccamorn.com/mind BeccaM

    And let’s also not forget how normal it’s become for the 0.01% to be rewarded with hundreds of millions of dollars…when they fail!

  • Whitewitch

    Hmmmm Naja, “let” you think we actually “let” congress do anything. I beg to differ – they “do” what they want, “to” whom they want, “when” they want. We sadly are just the silly audience to a puppet show which ends badly for us.

  • Whitewitch

    Cole3244 see dddavid’s comment above, if you remove the cap you will also have to remove the cap on benefits paid, so it would be a wash really. The rich would get ubber big checks when they hit 72 (the maximum age to begin collecting) so it would really not help.

  • nicho

    Well, make it so it will be there.

  • nicho

    Then, we can cap people’s salaries. That would work. The SS formulas were designed to cover 90% of the country’s incomes. However, because of growing income disparity, more and more income is going to the 0.01%, meaning that less than 80% of the country’s income is being subjected to SS taxes. That’s the real threat to the system. No one does work that is worth $150,000,000 a year. That’s the problem.

  • Monoceros Forth

    You know…call me just a dirty, smelly “taker” who doesn’t know how the real world works, but I’ve never quite understood just what these multimillionaires actually do. Oh, I accept on an intellectual level that there must be some skills that an elite CEO has that I don’t have and that few other people have. Maybe. They seem so interchangeable, though. What is their actual skill? Am I old-fashioned in thinking that a job should correspond with a skill of some sort?

    Of course these questions of mine are largely (though not completely) rhetorical. We all know that the real mechanism that causes top-flight CEOs to make more money than anyone else on the planet isn’t really skill or ability. Instead it’s a kind of positive-feedback mechanism built into the structure of modern capitalism. The more money you have, the easier it is to make more of it because you can shape events as you please to direct more money your way. Once you get past a certain point it’s got nothing to do with skill or talent or anything else except having enough money to buy yourself a clear path upward.

    Compared to the situation we have now in this country, a hereditary aristocracy is almost preferable. Conferring special status on someone just because they were born to the correct parents might seem laughable and arbitrary but at least the arbitrariness is right out in the open. You can’t pretend there’s a good reason for it. What we have now is worse: it’s just as arbitrary but it’s cloaked in a thin disguise of meritocracy. Because this is America, right? America, where there is no aristocracy, no concept of “class”, where anyone can grow up to be anybody. That’s what we’re taught.

  • Drew2u

    OT: any veracity to the leaked text of the environmental impact portion of the TPP?

    http://sierraclub.typepad.com/compass/2014/01/leaked-secret-trade-document-reveals-weak-environmental-standards.html

  • http://www.americablog.com/ Naja pallida

    If you’re working and paying your taxes, you’re paying into it… so the only reason there would be nothing left for you when it comes time to retire is if we let Congress steal it from us for their corporate masters.

  • devlzadvocate

    I didn’t take the post as a move to remove the cap or decouple tax from benes. I took it as an example of the extreme dispartity between the 1% (or fewer) and the remainder who pay FICA all year long because they never reach the cap, never come close to the cap, have no chance of ever coming within arm’s reach of the cap. That is a reflection on gross income, wage gaps, huge increases in pay between upper and lower classes and need for increase in Federal Minimum Wage laws. We can make those changes or look forward to something else in the future that may not be as pretty.

  • http://heimaey.us/ heimaey

    I am thinking that but I’m also a realist. It’s not going to be there when I need it. That’s not a defeatist attitude – that’s a fact.

  • Dddavid

    The social security tax is not paid on income above $117,000, because it is really more of an insurance premium, and you are not insured (receive no benefits) on income above $117,000. If you start taxing people on this income it really doesn’t solve any solvency issues with social security, as you would then be paying more benefits to these people when they retire. Do NOT attempt to decouple the social security tax from the benefits. It will NOT end well for the American people.

  • cole3244

    increase payroll taxes and remove the cap on ss tax or at least raise it.

    stop protecting the 1% at the expense of the 99% who are the reason america is the land of the free and the home of the brave, the 1% are only along for the ride.

  • http://adgitadiaries.com/ karmanot

    Exactly

  • nicho

    And that’s exactly what they want you to think, so that when they steal it from you, you’ll just shrug your shoulders. What you should be thinking is “I’m going to get that or there’s going to be some big trouble for someone.” They want you to be defeatist. That’s their plan.

  • JaneE

    I worked for a company that paid executive bonuses to the “management” level and above. Those bonuses were always the first payments made each year. If you were in management and actually saw Social Security deducted from your first regular check, you knew that you needed to start looking for a new job. Everyone with the title of manager or higher had their social security covered by the bonus check. The limits were not quite so high as now, but the vast majority of employees never hit the limit, even with overtime.

  • http://heimaey.us/ heimaey

    Whenever I see Social Security I’m like whatever, because I’ll never get any of that.

  • perljammer

    Social Security is the only FEDERAL tax that is capped. States have others as well. For example, in California for 2014, State Disability Insurance tax is 1% of first $101,636. And, like Social Security, benefits are also capped.

  • arcadesproject

    But that’s gotta go down to 0, or they will leave this confiscatory hellhole and pedal their shit in Burkina Faso.

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