Who pays Social Security taxes?
Coronavirus-related decline in tax revenues is raising concern among experts
Workers also contributing less to retirement funds; Fox Biz Flash: 5/27.
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About 65 million Americans receive Social Security checks – but who pays for those benefits?
Payroll taxes, which are paid by workers and their employers, fund both Social Security and Medicare.
Employers and employees each pay 6.2 percent for Social Security and 1.45 percent for Medicare, and an additional 0.9 percent is levied on the highest earners.
Self-employed individuals pay 12.4 percent to account for both the worker's and employer’s split. These people are able to claim a tax break for half of that payment.
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There is a cap on taxable earnings, which for 2020 is $137,700.
The average Social Security benefit as of March was $1,387.26.
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Despite the program’s popularity, its long-term solvency is in jeopardy.
The annual trustees’ report released last month estimated the program’s reserves would be depleted by 2035. At that time, continuing tax income was expected to be sufficient to cover 79 percent of scheduled benefits.
However, as previously reported by FOX Business, experts are concerned that the coronavirus pandemic could drain the program’s funds even sooner. That’s primarily because about 40 million Americans have filed unemployment claims – leading to a decline in payroll tax revenue. Unemployment benefits are not subject to payroll taxes.
A new analysis conducted by researchers at the Penn Wharton Budget Model showed Social Security is at risk of running out of funds in 2032 depending on the shape of the U.S. economic recovery.
A separate analysis, which also took into account the effect of the pandemic, estimated Social Security’s funding may run dry as soon as 2029.
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Meanwhile, as a means to give Americans a financial boost as state economies begin to reopen, the Trump administration is considering either reducing or temporarily suspending the payroll tax to help both businesses and workers. Critics, however, are concerned that if this money is not repaid it will further damage Social Security’s funding situation.