StickWithANose

The dirty little secret behind all of the political machinations over the un-funded liabilities of Social Security is that there is an easy fix to the whole mess: raise the cap on payroll taxes. With the wealthiest Americans now taking home a third of all income, the amount of income that exceeds the SS wage base continues to sky rocket as the trust fund continues to run out of money. From the WSJ via Naked Capitalism:

Executives and other highly compensated employees now receive more than one-third of all pay in the U.S…. Highly paid employees received nearly $2.1 trillion of the $6.4 trillion in total U.S. pay in 2007, the latest figures available. The compensation numbers don’t include incentive stock options, unexercised stock options, unvested restricted stock units and certain benefits.

The pay of employees who receive more than the Social Security wage base — now $106,800 — increased by 78%, or nearly $1 trillion, over the past decade, exceeding the 61% increase for other workers, according to the analysis. In the five years ending in 2007, earnings for American workers rose 24%, half the 48% gain for the top-paid. The result: The top-paid represent 33% of the total, up from 28% in 2002.

The growing portion of pay that exceeds the maximum amount subject to payroll taxes has contributed to the weakening of the Social Security trust fund…

The data suggest that the payroll tax ceiling hasn’t kept up with the growth in executive pay. As executive pay has increased, the percentage of wages subject to payroll taxes has shrunk, to 83% from 90% in 1982. Compensation that isn’t subject to the portion of payroll tax that funds old-age benefits now represents foregone revenue of $115 billion a year.