Trying to talk about the payroll tax gets to the very heart of why we pay taxes, and what social security is, exactly. Neither of which are evident in its case. Is it a savings program, or is it a safety net? If it's a savings program (and I actually get my proportion back at some future point), then I want the money for myself. Give me 12.4% of my pay and mandate that I can't spend it until I'm 59.5, like an IRA. If it's a safety net, then by definition we're all in it together, and therefore it should be taxed as income like every other government program. I don't like how much we spend on the military, but I'm not absolved from paying taxes on it because I don't benefit as much from it as someone who lives in a place where there is a high level of military spending. I'm not at all arguing that the 12.4% should be collected as income tax. I'm arguing that social security should be funded by income tax (it it is in fact a social safety net; again, we've never really defined it).
My gripe about how it is calculated has everything to do with the cap, whether it's a safety net or savings program. For example, imagine a married couple who each make $100,000. Combined, they make well beyond the cap, but separately they're both under. Annually, they'll pay $25,000 in payroll tax. Now imagine a married couple in which one spouse earns $200,000 and the other earns 0. Combined, they'll pay more than $10,000 less in payroll tax (plus the other "Marriage Penalty" they're not hit with, but that's a whole other story that will just piss me off more to talk about) than the first couple. They are free to take that $10,000 and dispose of it at will, including doing such things as investing in certainly higher average return programs.
Taxing all income equally would of course require raising the income tax across the board, because it isn't probably sustainable to give up whatever ridiculous number the social security administration collects every year. We can go back and forth about whether it's regressive or not, but they way it is currently structured is the most nanny state program we have. Social security needs a dramatic reorganization and redefinition, so that we all know what it is we're paying for and why. There is no other program that has this tax and spend structure, and I would argue that it hurts earners more than it helps them.