Do lower-income Americans pay a larger proportion of their income toward Social Security than wealthy Americans? According to a viral social media post, they do.
“A worker making $50,000 a year contributes to Social Security with 100% of their income,” the Threads post reads. “A CEO making $20 million a year contributes to Social Security with less than 1% of their income. It’s time to scrap the cap.”
The post is accurate but missing important context. Social Security taxes are applied only to income below a particular cap, meaning some high earners pay the tax on a lower proportion of their income than low earners. But benefits to recipients are capped as well, so low earners also receive more in Social Security benefits relative to their income than high earners do.
Social Security derives most of its revenue from the Federal Insurance Contribution Act (FICA) tax—one of several payroll taxes that can be deducted directly from Americans’ paychecks. As of 2024, Americans pay a 6.2 percent Social Security tax—known as the “old-age, survivors, and disability insurance” (OASDI) tax—plus a 1.45 percent Medicare tax: a total of 7.65 percent. This amount is matched by employers, who pay an additional 7.65 percent tax on each employee’s earnings.
Unlike federal and state income taxes, FICA taxes are not applied to the entirety of a person’s income. In 2024, the first $168,600 of an individual’s earnings is subject to the 7.65 percent FICA tax, and in 2025, the first $176,100 will be taxable. Individuals with earnings above $200,000, couples filing jointly with earnings above $250,000, and couples filing individually with earnings above $125,000 each, however, are subject to an additional 0.9 percent Medicare tax.
Because of this cap, a person making $50,000 per year in 2024 would pay a 6.2 percent Social Security tax on the entirety of their income: or approximately $3,100. A person making $20 million would pay the same 6.2 percent rate, but only on the first $168,600 of their income (or approximately $10,453). As a result, the lower-income worker would pay a significantly higher percentage of their overall earnings toward Social Security than the high-income CEO would.
This cap, however, also applies to Social Security benefits, meaning the lower-salaried worker also receives a much higher proportion of benefits relative to their earnings than the wealthy CEO. According to the Social Security Administration, a CEO who made $20 million per year for his or her entire career and retired in 2024 at the full retirement age of 67 would receive a maximum benefit of $45,864, the same amount someone making an average of $200,000 per year would receive, and only 0.23 percent of their pre-retirement income. A worker making only $29,813 per year on average would, by contrast, receive $15,477 in benefits, or 52 percent of their pre-retirement income.
According to Andrew Biggs, a senior fellow at the American Enterprise Institute and expert on Social Security reform, this is one of the reasons that the tax cap persists. “If the payroll tax ceiling were abolished, benefits would increase as well—since taxes and benefits are calculated based on the same wage base. If the payroll tax ceiling were abolished, a CEO earning $20 million per year would end up receiving an annual Social Security benefit of over $1.5 million,” Biggs told The Dispatch Fact Check. “This isn’t simply an absurd amount, it also would offset much of the improvement to Social Security’s solvency that eliminating the payroll tax ceiling seemingly would achieve.”
While the OASDI tax is regressive, meaning low-income earners pay a higher percentage of their income towards the tax than high earners do, the Social Security program as a whole is not. “Even if the tax itself is regressive, the combination of Social Security taxes and benefits isn’t,” Biggs explained. “Low-wage workers tend to receive much more in benefits than they paid in taxes, while for high-wage workers it’s the opposite.”
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