How is Social Security Financed?
Social Security is financed through a dedicated payroll tax. Employers and employees each pay 6.2 percent of wages up to the taxable maximum of $117,000 (in 2014), while the self-employed pay 12.4 percent.
In 2012, $590 billion (70 percent) of total OASI and DI income came from payroll taxes. The remainder was provided by interest earnings ($109 billion or 13 percent) and revenue from taxation of OASDI benefits ($27 billion or 3 percent), and $114 billion in reimbursements from the General Fund of the Treasury - almost exclusively resulting from the 2012 payroll tax legislation.
The payroll tax rates are set by law and for OASI and DI apply to earnings up to a certain amount. This amount, called the earnings base, rises as average wages increase.
|2000 and later||5.30||0.90||6.20|
|SOURCE: 2013 OASDI Trustees Report.|