The Keeping Our Social Security Promises Act would eliminate the cap subject to payroll taxes on earned income above $250,000. Currently, workers owe a payroll tax of 6.2% of a wages up to $106,800 a year, and the bill would add that obligation to those earning over $250,000.
According to a fact sheet on Sanders Web site, the “donut hole” in the payroll tax from $106,800 to $250,000 is because the sponsoring legislators wanted to make sure that Social Security is strengthened without raising taxes on anyone making less than $250,000 or cutting benefits. In addition, the fact sheet notes this legislation is what President Obama proposed when he campaigned for President in 2008.
According to a September 7, 2011, letter from Steve Goss, the Chief Actuary of the Social Security Administration: “Assuming enactment, the [Social Security] program would be expected to be solvent for the next 75 years … The assets in the combined [Social Security Trust Fund] would be positive throughout the 75-year period, meaning that solvency would be expected throughout the period … For the 75-year long-range period as a whole, the present-law unfunded obligation of $6.5 trillion in present value is replaced with a positive trust fund balance of [$40 billion] in present value through the end of the period.”
U.S. Representative Peter DeFazio (D-Oregon) has introduced similar legislation in the House.More about the bill is available here.