Some people seem to think that Social Security taxes are unfair because they have an income cap that makes them, in effect, regressive. This year, the cap is $118,500. Next year it rises to $127,000. People whose annual incomes are less than the cap pay Social Security taxes on their entire income, for the entire year. However, someone like an NFL superstar who makes millions of dollars a year, stops paying those taxes by the end of January, and only on a small portion of his income. But does this really make Social Security taxes unfair?
Well, it depends on how you look at it. Keep in mind that a person who makes far more than the cap will receive no more in Social Security benefits than someone who is just under it. So why should the former continue paying Social Security taxes beyond the point where he or she will receive additional benefits? Remember, Social Security taxes are not general taxes. They are supposed to be going into a trust fund out of which one will receive future benefits. So why then would it be fair to force someone to pay in an amount that is greatly out of proportion to what he or she will get out of it? Wouldn’t that be unfair?