Summary of Provisions That Would Change the Social Security Program
Description of Proposed Provisions:
Provisions Affecting Payroll Taxes
Estimates based on the intermediate assumptions of
the 2022 Trustees Report
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|
Change from current law [percent of payroll] |
Shortfall eliminated | |||||
|---|---|---|---|---|---|---|
|
Long-range actuarial balance |
Annual balance in 75th year |
Long-range actuarial balance |
Annual balance in 75th year |
|||
| Current law shortfall in long-range actuarial balance is 3.42 percent of payroll and in annual balance for the 75th year is 4.25 percent of payroll. | ||||||
| E1.1 |
Increase the payroll tax rate (currently 12.4 percent) to 16.0 percent
in 2023 and later.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board 2005) |
3.51 | 3.61 | 103% | 85% | |
| E1.2 |
Increase the payroll tax rate (currently 12.4 percent) to 16.2 percent
in 2035-2064, and to 20.0 percent in years 2065 and later.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board 2005) |
4.30 | 7.51 | 126% | 177% | |
| E1.4 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage point
each year from 2028-2047, until the rate reaches 14.4 percent in 2047 and later.
graph | table | pdf-graph | pdf-table | memo (Larson 2014) | memo (National Academy of Social Insurance 2009) |
1.50 | 2.02 | 44% | 47% | |
| E1.8 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage point
each year from 2025-2030, until the rate reaches 13.0 percent for 2030 and later.
graph | table | pdf-graph | pdf-table | memo (Moore 2023) | memo (Moore 2022) | memo (Moore 2019) | memo (Moore 2013) |
0.55 | 0.61 | 16% | 14% | |
| E1.9 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage point
each year from 2026-2049, until the rate reaches 14.8 percent in 2049 and later.
graph | table | pdf-graph | pdf-table | memo (Larson, Blumenthal, Van Hollen September 2019) | memo (Larson, Blumenthal, Van Hollen January 2019) | memo (Larson 2017) |
1.80 | 2.42 | 53% | 57% | |
| E1.10 |
Increase the payroll tax rate by 0.1 percentage point per year for 2024 through
2033 so that it equals 13.4 percent for 2033 and later. The increase would be split
evenly between the employer and employee share, and would be split between OASI
and DI in proportion to currently scheduled payroll tax rates.
graph | table | pdf-graph | pdf-table | memo (Bipartisan Policy Center October 2016) | memo (Bipartisan Policy Center June 2016) |
0.90 | 1.01 | 26% | 24% | |
| E2.1 |
Eliminate the taxable maximum in years 2023 and later, and apply full 12.4
percent payroll tax rate to all earnings. Do not provide benefit credit for
earnings above the current-law taxable maximum.
graph | table | pdf-graph | pdf-table | memo (DeFazio 2015) | memo (Social Security Advisory Board 2005) |
2.57 | 2.61 | 75% | 61% | |
| E2.2 |
Eliminate the taxable maximum in years 2023 and later, and apply full 12.4
percent payroll tax rate to all earnings. Provide benefit credit for earnings
above the current-law taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board 2005) |
1.99 | 1.60 | 58% | 38% | |
| E2.4 |
Eliminate the taxable maximum for years 2029 and later (phased in 2023-2029),
and apply full 12.4 percent payroll tax rate to all earnings. Provide benefit
credit for earnings above the current-law taxable maximum that are subject to
the payroll tax, using a secondary PIA formula. This secondary PIA formula involves:
(1) an "AIME+" derived from annual earnings from each year after 2022 that were
in excess of that year's current-law taxable maximum; (2) a new bend point equal
to $8,933 in 2023, indexed by wages after 2023; and (3) formula factors of 3
percent and 0.25 percent below and above the new bend point, respectively.
graph | table | pdf-graph | pdf-table | memo (Deutch, Hirono 2022) | memo (Deutch, Hirono 2019) | memo (Deutch, Hirono 2017) | memo (Deutch 2015) | memo (Deutch 2010) |
2.39 | 2.50 | 70% | 59% | |
| E2.5 |
Apply 12.4 percent payroll tax rate on earnings above $250,000 starting in 2023,
and tax all earnings once the current-law taxable maximum exceeds $250,000. Do
not provide benefit credit for additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Sanders 2023) | memo (Sanders, DeFazio 2022) | memo (Sanders, DeFazio 2019) | memo (Sanders, DeFazio 2017) | memo (Sanders 2016) | memo (Sanders 2015) | memo (Sanders 2013) | memo (DeFazio 2011) |
2.50 | 2.61 | 73% | 61% | |
| E2.11 |
Eliminate the taxable maximum in years 2028 and later. Phase in elimination by
taxing all earnings above the current-law taxable maximum at: 2.48 percent in 2024,
4.96 percent in 2025, and so on, up to 12.40 percent in 2028. Provide benefit credit
for earnings above the current-law taxable maximum that are subject to the payroll
tax, using a secondary PIA formula. This secondary PIA formula involves: (1) an
"AIME+" derived from annual earnings from each year after 2022 that were in excess
of that year's current-law taxable maximum; and (2) a formula factor of 5 percent
on this newly computed "AIME+".
graph | table | pdf-graph | pdf-table | memo (Sanchez 2016) | memo (Schatz 2015) | memo (Harkin 2013) |
2.27 | 2.28 | 66% | 54% | |
| E2.12 |
Eliminate the taxable maximum in years 2034 and later. Phase in elimination by taxing
all earnings above the current-law taxable maximum at: 1.24 percent in 2025, 2.48 percent
in 2026, and so on, up to 12.40 percent in 2034. Provide benefit credit for earnings
above the current-law taxable maximum. Create a new bend point at the current-law taxable
maximum with a 3 percent formula factor applying above the new bend point.
graph | table | pdf-graph | pdf-table | memo (Moore 2023) | memo (Moore 2022) | memo (Moore 2019) | memo (Moore 2013) |
2.06 | 2.23 | 60% | 52% | |
| E2.13 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $400,000 starting in
2024, and tax all earnings once the current-law taxable maximum exceeds $400,000.
Provide benefit credit for earnings above the current-law taxable maximum that are
subject to the payroll tax, using a secondary PIA formula. This secondary PIA formula
involves: (1) an "AIME+" derived from annual earnings from each year after 2023
that were in excess of that year's current-law taxable maximum; and (2) a formula
factor of 2 percent on this newly computed "AIME+".
graph | table | pdf-graph | pdf-table | memo (Larson, Blumenthal, Van Hollen September 2019) | memo (Larson, Blumenthal, Van Hollen January 2019) | memo (Larson 2017) | memo (Larson 2015) | memo (Larson 2014) |
2.18 | 2.48 | 64% | 58% | |
| E2.14 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $250,000 starting in
2024, and tax all earnings once the current-law taxable maximum exceeds $250,000.
Provide benefit credit for earnings above the current-law taxable maximum that are
subject to the payroll tax, using a secondary PIA formula. This secondary PIA formula
involves: (1) an "AIME+" derived from annual earnings from each year after 2023
that were in excess of that year's current-law taxable maximum; and (2) a formula
factor of 2 percent on this newly computed "AIME+".
graph | table | pdf-graph | pdf-table | memo (Lawson 2021) | memo (Lawson 2017) |
2.39 | 2.48 | 70% | 58% | |
| E2.15 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $300,000 starting in
2024, and tax all earnings once the current-law taxable maximum exceeds $300,000.
Provide benefit credit for earnings above the current-law taxable maximum that are
subject to the payroll tax, using a secondary PIA formula. This secondary PIA formula
involves: (1) an "AIME+" derived from annual earnings from each year after 2023 that
were in excess of that year's current-law taxable maximum; and (2) a formula factor
of 3 percent on this newly computed "AIME+".
graph | table | pdf-graph | pdf-table | memo (Crist 2017) |
2.28 | 2.41 | 67% | 57% | |
| E2.16 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $250,000 starting in
2023, and tax all earnings once the current-law taxable maximum exceeds $250,000.
Increase the computed level of the SSA average wage index for years after 2022 by
amounts ranging from 0.7 percent for 2023 to 0.9 percent for 2035 and later. Provide
benefit credit for earnings above the current-law taxable maximum that are subject
to the payroll tax, using a secondary PIA formula. This secondary PIA formula involves:
(1) an "AIME+" derived from annual earnings from each year after 2022 that were in
excess of that year's current-law taxable maximum; and (2) a formula factor of 2
percent on this newly computed "AIME+".
graph | table | pdf-graph | pdf-table | memo (Craig 2022) |
2.35 | 2.41 | 69% | 57% | |
| E3.1 |
Increase the taxable maximum such that 90 percent of earnings would be
subject to the payroll tax (phased in 2023-2032). Provide benefit credit
for earnings up to the revised taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board 2005) |
0.69 | 0.41 | 20% | 10% | |
| E3.2 |
Increase the taxable maximum such that 90 percent of earnings would be
subject to the payroll tax (phased in 2023-2032). Do not provide benefit
credit for additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Liebman, MacGuineas, Samwick 2005) |
1.07 | 1.18 | 31% | 28% | |
| E3.5 |
Increase the taxable maximum each year by an additional 2 percent beginning
in 2023 until taxable earnings equal 90 percent of covered earnings. Provide
benefit credit for earnings up to the revised taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Bipartisan Policy Center 2010) | memo (National Academy of Social Insurance 2009) |
0.59 | 0.46 | 17% | 11% | |
| E3.6 |
Increase the taxable maximum each year by an additional 2 percent beginning
in 2025 until taxable earnings equal 90 percent of covered earnings. Do not
provide benefit credit for additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (NRC/NAPA 2010) |
0.83 | 1.18 | 24% | 28% | |
| E3.7 |
Increase the taxable maximum by an additional 2 percent per year beginning
in 2024 until taxable earnings equal 90 percent of covered earnings. Provide
benefit credit for earnings up to the revised taxable maximum. Create a new
bend point equal to the current-law taxable maximum with a 5 percent formula
factor applying above the new bend point.
graph | table | pdf-graph | pdf-table | memo (Fiscal Commission 2010) |
0.67 | 0.78 | 19% | 18% | |
| E3.8 |
Beginning in 2030, apply 2 percent payroll tax rate on earnings over the
wage-indexed equivalent of $200,000 in 2017 (about $331,800 in 2030), with
the threshold wage-indexed after 2030. Provide proportional benefit credit
for additional earnings taxed, based on the payroll tax rate applied to the
additional earnings divided by the full 12.4 percent payroll tax rate.
graph | table | pdf-graph | pdf-table | memo (Johnson, Brady, Ryan 2010) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.19 | 0.14 | 6% | 3% | |
| E3.9 |
Beginning in 2030, apply 2 percent payroll tax rate on earnings over the
wage-indexed equivalent of $200,000 in 2017 (about $331,800 in 2030), with
the threshold wage-indexed after 2030. Do not provide benefit credit for
additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Johnson, Brady, Ryan 2010) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.26 | 0.30 | 8% | 7% | |
| E3.10 |
Beginning in 2030, apply 2 percent payroll tax rate on earnings over the
wage-indexed equivalent of $300,000 in 2017 (about $497,400 in 2030), with
the threshold wage-indexed after 2030. Provide proportional benefit credit
for additional earnings taxed, based on the payroll tax rate applied to
the additional earnings divided by the full 12.4 percent payroll tax rate.
graph | table | pdf-graph | pdf-table | memo (Johnson, Brady, Ryan 2010) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.14 | 0.10 | 4% | 2% | |
| E3.11 |
Beginning in 2030, apply 2 percent payroll tax rate on earnings over the
wage-indexed equivalent of $300,000 in 2017 (about $497,400 in 2030), with
the threshold wage-indexed after 2030. Do not provide benefit credit for
additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Johnson, Brady, Ryan 2010) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.19 | 0.22 | 6% | 5% | |
| E3.12 |
Beginning in 2030, apply 2 percent payroll tax rate on earnings over the
wage-indexed equivalent of $400,000 in 2017 (about $663,300 in 2030), with
the threshold wage-indexed after 2030. Provide proportional benefit credit
for additional earnings taxed, based on the payroll tax rate applied to the
additional earnings divided by the full 12.4 percent payroll tax rate.
graph | table | pdf-graph | pdf-table | memo (Johnson, Brady, Ryan 2010) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.11 | 0.08 | 3% | 2% | |
| E3.13 |
Beginning in 2030, apply 2 percent payroll tax rate on earnings over the
wage-indexed equivalent of $400,000 in 2017 (about $663,300 in 2030), with
the threshold wage-indexed after 2030. Do not provide benefit credit for
additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Johnson, Brady, Ryan 2010) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.16 | 0.18 | 5% | 4% | |
| E3.14 |
Eliminate the taxable maximum for the employer payroll tax (6.2 percent) beginning
in 2023. For the employee payroll tax (6.2 percent) and for benefit credit purposes,
beginning in 2023, increase the taxable maximum by an additional 2 percent per year
until taxable earnings equal 90 percent of covered earnings.
graph | table | pdf-graph | pdf-table | memo (National Academy of Social Insurance 2009) |
1.48 | 1.20 | 43% | 28% | |
| E3.15 |
Increase the taxable maximum such that 90 percent of earnings are subject to
the payroll tax (phased in 2023-2032). In addition, apply a tax rate of 6.2
percent for earnings above the revised taxable maximum (phased in from 2023-2032).
Provide benefit credit for earnings taxed up to the revised taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Senate Special Committee on Aging 2010) |
1.38 | 1.14 | 40% | 27% | |
| E3.16 |
Beginning in 2024, apply 4 percent payroll tax rate on earnings above the
wage-indexed equivalent of $400,000 in 2015 (about $557,700 in 2024), with
the threshold wage-indexed after 2024. Provide benefit credit for additional
earnings taxed, using a secondary PIA formula. This secondary PIA formula
involves: (1) an "AIME+" derived from annual earnings taxed only between
2015 wage-indexed equivalents of $400,000 and $500,000, or about $557,700
and $697,200 in 2024 (with thresholds wage-indexed after 2024); and (2) a
formula factor of 2 percent on this newly computed "AIME+".
graph | table | pdf-graph | pdf-table | memo (Begich, Murray 2014) |
0.33 | 0.34 | 10% | 8% | |
| E3.17 |
Beginning in 2024, increase the taxable maximum by twice the rate of increase
in the national Average Wage Index, but never by less than 3 percent. Provide
benefit credit for earnings up to the revised taxable maximum levels.
graph | table | pdf-graph | pdf-table | memo (Murphy 2016) |
0.99 | 1.19 | 29% | 28% | |
| E3.18 |
Increase the taxable maximum linearly over 4 years to $267,900 for 2027. After
2027, index the taxable maximum to AWI plus 0.5 percentage point. Apply benefit
credit on additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Bipartisan Policy Center October 2016) | memo (Bipartisan Policy Center June 2016) |
0.55 | 0.49 | 16% | 11% | |
| E3.19 |
Increase the taxable maximum such that 90 percent of earnings would be subject
to the payroll tax (phased in linearly from 2024-2029). Provide benefit credit
for additional earnings taxed, using a secondary PIA formula. This secondary PIA
formula involves: (1) an "AIME+" derived from additional annual earnings taxed
over the current-law taxable maximum; and (2) a formula factor of 2.5 percent
on this newly computed "AIME+".
graph | table | pdf-graph | pdf-table | memo (Ribble 2016) |
1.04 | 1.09 | 31% | 26% | |