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Is Your Entire Income at Risk? The Impending Social Security Tax Overhaul You Need to Know


Navigating the Generational Wealth Landscape: Opportunities and Realities

April 14, 2024

Here's the future… you pay Social Security tax on ALL of your income?

It's unfortunate that most politicians and economists don't explain our $34 trillion dollars of debt in a more simple fashion, so here's some insight on how the basic math works. If you really understand the math, it's not hard to deduce what outcomes may arise in the future. With another four years of the current tax policies, you can be certain both at the individual level and the corporate level that a perpetuity tax on Social Security will become front and center. Here's why:

Revenue Streams: A Closer Look

If you think about the Government like a business (a badly run one), we really have three broad ways we bring in income since the Government doesn't sell cheeseburgers and we don't make money putting things on Amazon. Here's what they are:

  • Personal Income Tax: 47% of U.S. revenue
  • Payroll Tax (Social Security and Medicare): 37% of U.S. revenue
  • Corporate Income Tax: 9.5% of U.S. revenue

Fiscal Deficits and Top Expenses

On the opposite side of the ledger, we run an annual fiscal deficit of roughly $1.8 trillion dollars and here are the top four expenses.

  • Medicare/Medicaid: 24% of spending
  • Social Security: 22% of spending
  • Defense: 13% of spending
  • Net Interest On The Debt: 11% of spending

Navigating the Fiscal Maze: Solutions and Challenges

Unfortunately, most of us don't have a printing press in our basement that will spit out thousands of dollars let alone the trillions of dollars of money we print on what seems to be a regular basis. So, how do you clean up this mess? How do you potentially 'balance' the budget? The simplicity of this is that you either have to decrease expenses, increase revenue, or have some combination of both.

As of its latest stance, The Social Security Board of Trustees now estimates that based upon current law, in 2041, the Social Security Trust Funds will be depleted. If you don't understand how Social Security tax, FICA on your paystub, works today, here's a basic explainer:

  • As an employee, you pay 6.2% of every paycheck into Social Security until you hit the FICA wage base cap which is $168,600 in 2024.
  • In addition, your employer ALSO pays the same 6.2% with the same cap.
  • If you are self-employed, you get the full enjoyment of paying both halves of the Social Security tax (note: you do get a small tax deduction come tax filing time)

The current administration clearly came out in 2023 saying that they would like to see payroll taxes become a 'perpetuity' tax once you hit the $400,000 mark of income. This means that both YOU and YOUR EMPLOYER would be responsible to pay in an additional 6.2% on every dollar of income you earn above that level. This is actually a slightly backhanded way of increasing corporate tax while you increase personal tax on Americans working hard to earn money. And, because the "donut hole" - the amount you make between $168,600 and $400,000 is not that great of a gap anymore, it doesn't take a huge leap of logic for the Government under current policies to just author up that Social Security becomes a perpetuity tax when the tax cuts expire in 2025.

Preparing for the Fiscal Paradigm Shift

With almost half of American families paying no federal tax whatsoever, it's no big surprise that the only solution that keeps coming up in current discussion is to tax the wealthy more. Where else will you get it from if 50% of the people pay no federal tax? You get it from those that are paying and make more money. Corporations only make up 9.5% of the revenue we generate. Increasing their tax could make a dent, but it's not even close to payroll tax we collect as a country. So, buyer beware, that a perpetuity tax on Social Security will be one of the top targets you could see come over the next four years that will affect both you and your employers.

Tick tock. Tick tock. The $34 trillion in debt keeps on ticking and just might cost some of you 6.2% of every dollar you make.


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About the author

Ted Jenkin in a suit and tie

Ted Jenkin

CEO and co-Founder


My friends and family all think I'm a workaholic, but I say I'm just a guy that loves to help people do better in life.

My mother is still the only one that calls me by my real name Theodore Michael, my wife calls me Teddy, but for the rest of you it is just plain old Ted.

Ever since I was a little kid, I always loved money and being an entrepreneur. In fact, I still have cassette tapes of me talking to my grandmother at the age of five and my mother tells me all the time how much I played with money as a kid...

Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. Investor Disclosures: https://bit.ly/KF-Disclosures

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice. https://Bit.ly/KF-Disclosures

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