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 2020 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 3.21 percent of payroll and in annual balance for the 75th year is 4.51 percent of payroll. | ||||||
E1.1 |
Increase the payroll tax rate (currently 12.4 percent) to 15.8 percent in
2021 and later.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
3.23 | 3.36 | 101% | 74% | |
E1.2 |
Increase the payroll tax rate (currently 12.4 percent) to 15.9 percent in
2033-2062, and to 19.4 percent in years 2063 and later.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
3.86 | 6.75 | 120% | 149% | |
E1.4 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage point
each year from 2026-2045, until the rate reaches 14.4 percent in 2045 and later.
graph | table | pdf-graph | pdf-table | memo (Larson 2014) | memo (National Academy of Social Insurance) |
1.47 | 1.99 | 46% | 44% | |
E1.8 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage point
each year from 2023-2028, until the rate reaches 13.0 percent for 2028 and later.
graph | table | pdf-graph | pdf-table | memo (Moore 2019) | memo (Moore 2013) |
0.54 | 0.60 | 17% | 13% | |
E1.9 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage
point each year from 2024-2047, until the rate reaches 14.8 percent in 2047.
Then increase the payroll tax rate an additional 0.1 percentage point in
each year from 2086-2090, until the rate reaches 15.3 percent for 2090
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) | memo (Larson 2015) |
1.80 | 2.85 | 56% | 63% | |
E1.10 |
Increase the payroll tax rate by 0.1 percentage point per year for 2022 through 2031
so that it equals 13.4 percent for 2031 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) |
0.88 | 1.00 | 27% | 22% | |
E2.1 |
Eliminate the taxable maximum in years 2021 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) |
2.36 | 2.48 | 73% | 55% | |
E2.2 |
Eliminate the taxable maximum in years 2021 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) |
1.78 | 1.44 | 55% | 32% | |
E2.3 |
Eliminate the taxable maximum in years 2021 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. 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 (National Academy of Social Insurance) |
2.12 | 2.12 | 66% | 47% | |
E2.4 |
Eliminate the taxable maximum for years 2027 and later (phased in 2021-2027),
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 2020 that were
in excess of that year's current-law taxable maximum; (2) a new bend point equal
to 134 percent of the monthly current-law taxable maximum; 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 2019) | memo (Deutch, Hirono 2017) | memo (Deutch 2015) | memo (Deutch 2010) |
2.18 | 2.34 | 68% | 52% | |
E2.5 |
Apply 12.4 percent payroll tax rate on earnings above $250,000 starting in 2021,
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, DeFazio 2019) | memo (Sanders, DeFazio 2017) | memo (Sanders 2016) | memo (Sanders 2015) | memo (Sanders 2013) | memo (DeFazio 2011) |
2.23 | 2.48 | 70% | 55% | |
E2.6 |
Apply a 3 percent payroll tax on earnings above the current-law taxable
maximum starting in 2021. Do not provide benefit credit for earnings above
the current-law taxable maximum.
graph | table | pdf-graph | pdf-table | memo (AARP) |
0.61 | 0.64 | 19% | 14% | |
E2.8 |
Apply a 2 percent payroll tax on earnings above the current-law taxable
maximum for years 2023-2070, and a 3 percent rate for years 2071 and later.
Do not provide benefit credit for earnings above the current-law taxable maximum.
graph | table | pdf-graph | pdf-table | memo (NRC/NAPA) |
0.45 | 0.63 | 14% | 14% | |
E2.11 |
Eliminate the taxable maximum in years 2026 and later. Phase in elimination by
taxing all earnings above the current-law taxable maximum at: 2.48 percent in 2022,
4.96 percent in 2023, and so on, up to 12.40 percent in 2026. 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 2020 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) | memo (Schatz) | memo (Harkin 2013) |
2.08 | 2.14 | 65% | 47% | |
E2.12 |
Eliminate the taxable maximum in years 2032 and later. Phase in elimination by
taxing all earnings above the current-law taxable maximum at: 1.24 percent in 2023,
2.48 percent in 2024, and so on, up to 12.40 percent in 2032. 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 2019) | memo (Moore 2013) |
1.90 | 2.12 | 59% | 47% | |
E2.13 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $400,000
starting in 2022, 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 2021
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) |
1.92 | 2.34 | 60% | 52% | |
E2.14 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $250,000
starting in 2022, 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 2021
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) |
2.14 | 2.34 | 67% | 52% | |
E2.15 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $300,000
starting in 2022, 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 2021
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) |
2.04 | 2.27 | 63% | 50% | |
E3.1 |
Increase the taxable maximum such that 90 percent of earnings would be
subject to the payroll tax (phased in 2021-2030). Provide benefit credit
for earnings up to the revised taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
0.72 | 0.55 | 22% | 12% | |
E3.2 |
Increase the taxable maximum such that 90 percent of earnings would
be subject to the payroll tax (phased in 2021-2030). Do not provide
benefit credit for additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Liebman, MacGuineas, Samwick) |
0.99 | 1.12 | 31% | 25% | |
E3.5 |
Increase the taxable maximum each year by an additional 2 percent beginning
in 2021 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) |
0.61 | 0.58 | 19% | 13% | |
E3.6 |
Increase the taxable maximum each year by an additional 2 percent beginning
in 2023 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) |
0.77 | 1.12 | 24% | 25% | |
E3.7 |
Increase the taxable maximum by an additional 2 percent per year beginning
in 2022 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) |
0.63 | 0.72 | 20% | 16% | |
E3.8 |
Beginning in 2028, apply 2 percent payroll tax rate on earnings over
the wage-indexed equivalent of $200,000 in 2017 (about $292,200 in 2028),
with the threshold wage-indexed after 2028. 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) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.18 | 0.13 | 6% | 3% | |
E3.9 |
Beginning in 2028, apply 2 percent payroll tax rate on earnings over the
wage-indexed equivalent of $200,000 in 2017 (about $292,200 in 2028), with
the threshold wage-indexed after 2028. Do not provide benefit credit for
additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Johnson, Brady, Ryan) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.25 | 0.30 | 8% | 7% | |
E3.10 |
Beginning in 2028, apply 2 percent payroll tax rate on earnings over the
wage-indexed equivalent of $300,000 in 2017 (about $438,600 in 2028), with
the threshold wage-indexed after 2028. 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) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.13 | 0.09 | 4% | 2% | |
E3.11 |
Beginning in 2028, apply 2 percent payroll tax rate on earnings over
the wage-indexed equivalent of $300,000 in 2017 (about $438,600 in 2028),
with the threshold wage-indexed after 2028. Do not provide benefit
credit for additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Johnson, Brady, Ryan) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.19 | 0.22 | 6% | 5% | |
E3.12 |
Beginning in 2028, apply 2 percent payroll tax rate on earnings over
the wage-indexed equivalent of $400,000 in 2017 (about $584,700 in 2028),
with the threshold wage-indexed after 2028. 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) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.11 | 0.08 | 3% | 2% | |
E3.13 |
Beginning in 2028, apply 2 percent payroll tax rate on earnings over
the wage-indexed equivalent of $400,000 in 2017 (about $584,700 in 2028),
with the threshold wage-indexed after 2028. Do not provide benefit credit
for additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Johnson, Brady, Ryan) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.15 | 0.18 | 5% | 4% | |
E3.14 |
Eliminate the taxable maximum for the employer payroll tax (6.2 percent)
beginning in 2021. For the employee payroll tax (6.2 percent) and for benefit
credit purposes, beginning in 2021, 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) |
1.41 | 1.30 | 44% | 29% | |
E3.15 |
Increase the taxable maximum such that 90 percent of earnings are subject
to the payroll tax (phased in 2021-2030). In addition, apply a tax rate of
6.2 percent for earnings above the revised taxable maximum (phased in from
2021-2030). Provide benefit credit for earnings taxed up to the revised
taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Senate Special Committee on Aging) |
1.35 | 1.26 | 42% | 28% | |
E3.16 |
Beginning in 2022, apply 4 percent payroll tax rate on earnings above
the wage-indexed equivalent of $400,000 in 2015 (about $495,900 in 2022),
with the threshold wage-indexed after 2022. 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 $495,900 and $619,800 in 2022 (with thresholds wage-indexed after
2022); and (2) a formula factor of 2 percent on this newly computed "AIME+".
graph | table | pdf-graph | pdf-table | memo (Begich, Murray) |
0.31 | 0.33 | 10% | 7% | |
E3.17 |
Beginning in 2022, 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) |
0.99 | 1.31 | 31% | 29% | |
E3.18 |
Increase the taxable maximum linearly over 4 years to $238,200 for 2025.
After 2025, 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) |
0.58 | 0.59 | 18% | 13% | |
E3.19 |
Increase the taxable maximum such that 90 percent of earnings would
be subject to the payroll tax (phased in linearly from 2022-2027).
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) |
0.96 | 1.03 | 30% | 23% |