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 $118,500 (in 2016), while the self-employed pay 12.4 percent.
In 2015, $795 billion (85 percent) of total Old-Age and Survivors Insurance and Disability Insurance income came from payroll taxes. The remainder was provided by interest earnings ( $93 billion or 10 percent) and revenue from taxation of OASDI benefits ( $32 billion or 3 percent), and $325 million in reimbursements from the General Fund of the Treasury - most 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: 2016 OASDI Trustees Report|