AARP Exam Questions with Correct Answers

AARP Exam Questions with Correct Answers Increase Payroll Tax Cap - Answer-The Social Security payroll tax currently applies to annual earnings up to $118,500. Any wages earned above $118,500 go untaxed for Social Security. This cap generally increases every year as the national average wage increases. Today, the cap covers about 84 percent of total earnings in the nation. Raising the cap to cover a higher percent of total earnings would help close Social Security's funding gap. This would mean any employee earning more than the current tax cap of $118,500 (as well as his or her employer) would have to pay more payroll taxes. Increase Payroll Tax Cap (Pro) - Answer-1. Make Social Security financing more fair by requiring top earners to pay somewhat more into Social Security 2. Eliminate more than a third (36 percent) of Social Security's projected financing gap over the long term. Increase Payroll Tax Cap (Against) - Answer-1. Cause a hefty tax increase that will hit middle-income taxpayers while not affecting the rich. It would especially hurt the self- employed and certain smaller business owners. 2. In general, increasing taxes is a bad idea. For one thing, it reduces the amount that Americans have to spend on their own and their family's food, housing clothes, education, and so on. Additional taxes that seem like a trivial amount to people in Washington may cause real problems to normal Americans. Eliminate Payroll Tax Cap - Answer-The Social Security payroll tax currently applies to annual earnings up to $118,500. Any wages earned above $118,500 go untaxed for Social Security. This cap generally increases every year with increases in the national average wage. Today, the cap covers about 84 percent of total earnings. Eliminating the cap so that all earnings would be subject to Social Security's payroll tax would help close the program's funding gap. If your income is under $118,500, you would see no change. If you make above that amount, you (as well as your employer) would pay the 6.2 percent payroll tax on your remaining wages. Eliminate Payroll Tax Cap (Pro) - Answer-1. Eliminating the cap on earnings subject to Social Security taxes would call on top earners to contribute more toward the basic economic security of the nation's elderly and families, commensurate with top earners' ability to pay. 2. Equalize the duration of Social Security taxes throughout the year, so that the top 6 percent of earners would pay into Social Security all year long, just as the other 94 percent of workers do.