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 $160,200 (in 2023), while the self-employed pay 12.4 percent.
Total income, including interest, to the combined OASI and DI Trust Funds amounted to $1.222 trillion in 2022. ($1.107 trillion from net payroll tax contributions, $49 billion from taxation of benefits, and $66 billion in interest)
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 contribution and benefit base, or taxable maximum, rises as average wages increase.
|SOURCE: 2023 OASDI Trustees Report|