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 2019 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 2.78 percent of payroll and in annual balance for the 75th year is 4.11 percent of payroll. | ||||||
E1.1 |
Increase the payroll tax rate (currently 12.4 percent) to 15.4 percent in
2020 and later.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
2.86 | 2.97 | 103% | 72% | |
E1.2 |
Increase the payroll tax rate (currently 12.4 percent) to 15.4 percent
in 2032-2061, and to 18.4 percent in years 2062 and later.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
3.30 | 5.80 | 119% | 141% | |
E1.4 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage
point each year from 2025-2044, until the rate reaches 14.4 percent in 2044
and later.
graph | table | pdf-graph | pdf-table | memo (Larson 2014) | memo (National Academy of Social Insurance) |
1.47 | 1.98 | 53% | 48% | |
E1.8 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage
point each year from 2022-2027, until the rate reaches 13.0 percent for
2027 and later.
graph | table | pdf-graph | pdf-table | memo (Moore 2019) | memo (Moore 2013) |
0.54 | 0.60 | 19% | 15% | |
E1.9 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage
point each year from 2023-2046, until the rate reaches 14.8 percent in 2046.
Then increase the payroll tax rate an additional 0.1 percentage point in
each year from 2085-2089, until the rate reaches 15.3 percent for 2089 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) |
1.79 | 2.85 | 64% | 69% | |
E1.10 |
Increase the payroll tax rate by 0.1 percentage point per year for 2021
through 2030 so that it equals 13.4 percent for 2030 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 | 32% | 24% | |
E2.1 |
Eliminate the taxable maximum in years 2020 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) |
2.35 | 2.45 | 84% | 60% | |
E2.2 |
Eliminate the taxable maximum in years 2020 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) |
1.80 | 1.46 | 65% | 35% | |
E2.3 |
Eliminate the taxable maximum in years 2020 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 | 2.11 | 76% | 51% | |
E2.4 |
Eliminate the taxable maximum for years 2026 and later (phased in
2020-2026), 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 2019 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 | 2.32 | 78% | 56% | |
E2.5 |
Apply 12.4 percent payroll tax rate on earnings above $250,000
starting in 2020, 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) |
2.22 | 2.45 | 80% | 60% | |
E2.6 |
Apply a 3 percent payroll tax on earnings above the current-law
taxable maximum starting in 2020. Do not provide benefit credit
for earnings above the current-law taxable maximum.
graph | table | pdf-graph | pdf-table | memo (AARP) |
0.61 | 0.63 | 22% | 15% | |
E2.8 |
Apply a 2 percent payroll tax on earnings above the current-law
taxable maximum for years 2022-2069, and a 3 percent rate for years
2070 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 | 16% | 15% | |
E2.11 |
Eliminate the taxable maximum in years 2025 and later. Phase in elimination
by taxing all earnings above the current-law taxable maximum at: 2.48 percent
in 2021, 4.96 percent in 2022, and so on, up to 12.40 percent in 2025. 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 | 2.12 | 75% | 52% | |
E2.12 |
Eliminate the taxable maximum in years 2031 and later. Phase in elimination
by taxing all earnings above the current-law taxable maximum at: 1.24 percent
in 2022, 2.48 percent in 2023, and so on, up to 12.40 percent in 2031. 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 | 2.11 | 68% | 51% | |
E2.13 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $400,000
starting in 2021, 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 2020
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 | 2.32 | 69% | 56% | |
E2.14 |
Apply OASDI 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. 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 2 percent on this newly computed "AIME+".
graph | table | pdf-graph | pdf-table | memo (Lawson) |
2.13 | 2.32 | 77% | 56% | |
E2.15 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $300,000
starting in 2021, 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 2020
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) |
2.03 | 2.25 | 73% | 55% | |
E3.1 |
Increase the taxable maximum such that 90 percent of earnings would
be subject to the payroll tax (phased in 2020-2029). Provide benefit
credit for earnings up to the revised taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
0.73 | 0.56 | 26% | 14% | |
E3.2 |
Increase the taxable maximum such that 90 percent of earnings would
be subject to the payroll tax (phased in 2020-2029). Do not provide
benefit credit for additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Liebman, MacGuineas, Samwick) |
0.99 | 1.10 | 35% | 27% | |
E3.5 |
Increase the taxable maximum each year by an additional 2 percent
beginning in 2020 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 | 0.59 | 22% | 14% | |
E3.6 |
Increase the taxable maximum each year by an additional 2 percent
beginning in 2022 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) |
0.76 | 1.10 | 27% | 27% | |
E3.7 |
Increase the taxable maximum by an additional 2 percent per year
beginning in 2021 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 | 0.71 | 23% | 17% | |
E3.8 |
Beginning in 2027, apply 2 percent payroll tax rate on earnings
over the wage-indexed equivalent of $200,000 in 2017 (about $288,600
in 2027), with the threshold wage-indexed after 2027. 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 2027, apply 2 percent payroll tax rate on earnings
over the wage-indexed equivalent of $200,000 in 2017 (about $288,600
in 2027), with the threshold wage-indexed after 2027. 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 | 0.29 | 9% | 7% | |
E3.10 |
Beginning in 2027, apply 2 percent payroll tax rate on earnings
over the wage-indexed equivalent of $300,000 in 2017 (about $432,600
in 2027), with the threshold wage-indexed after 2027. 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 | 0.10 | 5% | 2% | |
E3.11 |
Beginning in 2027, apply 2 percent payroll tax rate on earnings
over the wage-indexed equivalent of $300,000 in 2017 (about $432,600
in 2027), with the threshold wage-indexed after 2027. 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) |
0.18 | 0.21 | 7% | 5% | |
E3.12 |
Beginning in 2027, apply 2 percent payroll tax rate on earnings
over the wage-indexed equivalent of $400,000 in 2017 (about $576,900
in 2027), with the threshold wage-indexed after 2027. 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 | 4% | 2% | |
E3.13 |
Beginning in 2027, apply 2 percent payroll tax rate on earnings
over the wage-indexed equivalent of $400,000 in 2017 (about $576,900
in 2027), with the threshold wage-indexed after 2027. 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 | 0.17 | 5% | 4% | |
E3.14 |
Eliminate the taxable maximum for the employer payroll tax (6.2
percent) beginning in 2020. For the employee payroll tax (6.2
percent) and for benefit credit purposes, beginning in 2020, 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 | 51% | 32% | |
E3.15 |
Increase the taxable maximum such that 90 percent of earnings are
subject to the payroll tax (phased in 2020-2029). In addition, apply
a tax rate of 6.2 percent for earnings above the revised taxable maximum
(phased in from 2020-2029). Provide benefit credit for earnings taxed
up to the revised taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Senate Special Committee on Aging) |
1.36 | 1.26 | 49% | 31% | |
E3.16 |
Beginning in 2021, apply 4 percent payroll tax rate on earnings
above the wage-indexed equivalent of $400,000 in 2015 (about $480,000
in 2021), with the threshold wage-indexed after 2021. 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 $480,000 and $600,000 in 2021
(with thresholds wage-indexed after 2021); and (2) a formula factor
of 2 percent on this newly computed "AIME+".
graph | table | pdf-graph | pdf-table | memo (Begich, Murray) |
0.30 | 0.32 | 11% | 8% | |
E3.17 |
Beginning in 2021, 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) |
1.03 | 1.35 | 37% | 33% | |
E3.18 |
Increase the taxable maximum linearly over 4 years to $232,200 for
2024. After 2024, 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) |
0.59 | 0.60 | 21% | 15% | |
E3.19 |
Increase the taxable maximum such that 90 percent of earnings
would be subject to the payroll tax (phased in linearly from
2021-2026). 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 | 1.01 | 34% | 25% |