Description of Proposed Provisions:
Provisions Affecting Payroll Taxes
Estimates based on the intermediate assumptions of
the 2017 Trustees Report
Printer-friendly Version (PDF)
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 2.83 percent of payroll and in annual balance for the 75th year is 4.48 percent of payroll. | ||||||
E1.1 |
Increase the payroll tax rate (currently 12.4 percent) to 15.4 percent in
2018 and later.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
2.85 | 2.97 | 101% | 66% | |
E1.2 |
Increase the payroll tax rate (currently 12.4 percent) to 15.5 percent in
2030-2059, and to 18.6 percent in years 2060 and later.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
3.33 | 5.99 | 118% | 134% | |
E1.3 |
Reduce the payroll tax rate (currently 12.4 percent) to 11.4 percent in
2018 and later.
graph | table | pdf-graph | pdf-table | memo (Warshawsky) |
-0.97 | -1.01 | -34% | -23% | |
E1.4 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage point
each year from 2023-2042, until the rate reaches 14.4 percent in 2042 and later.
graph | table | pdf-graph | pdf-table | memo (Larson 2014) | memo (National Academy of Social Insurance) |
1.45 | 1.99 | 51% | 44% | |
E1.5 |
Increase the payroll tax rate (currently 12.4 percent) to 12.6 percent in 2020,
12.9 percent in 2028, 13.1 in percent in 2038, 13.9 percent in 2048, 13.5 percent
in 2058, and 13.3 percent in 2068 and later.
graph | table | pdf-graph | pdf-table | memo (NRC/NAPA) |
0.76 | 0.91 | 27% | 20% | |
E1.6 |
Increase the payroll tax rate (currently 12.4 percent) to 12.6 percent in 2020,
12.9 percent in 2028, 13.3 in percent in 2038, 13.8 percent in 2048, 14.4 percent
in 2068, and 14.5 percent in 2083 and later.
graph | table | pdf-graph | pdf-table | memo (NRC/NAPA) |
1.07 | 2.07 | 38% | 46% | |
E1.7 |
Increase the payroll tax rate (currently 12.4 percent) to 12.7 percent in 2020,
13.0 percent in 2033, 13.3 in percent in 2048, 14.0 percent in 2068, 14.5 percent
in 2078, and 14.7 percent in 2088 and later.
graph | table | pdf-graph | pdf-table | memo (NRC/NAPA) |
0.88 | 2.25 | 31% | 50% | |
E1.8 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage
point each year from 2020-2025, until the rate reaches 13.0 percent for
2025 and later.
graph | table | pdf-graph | pdf-table | memo (Moore) |
0.54 | 0.60 | 19% | 13% | |
E1.9 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage
point each year from 2021-2044, until the rate reaches 14.8 percent in
2044. Then increase the payroll tax rate an additional 0.1 percentage
point in each year from 2083-2087, until the rate reaches 15.3 percent
for 2087 and later.
graph | table | pdf-graph | pdf-table | memo (Larson 2017) | memo (Larson 2015) |
1.76 | 2.85 | 62% | 64% | |
E1.10 |
Increase the payroll tax rate by 0.1 percentage point per year for 2019
through 2028 so that it equals 13.4 percent for 2028 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 | 31% | 22% | |
E2.1 |
Eliminate the taxable maximum in years 2018 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 | 2.46 | 83% | 55% | |
E2.2 |
Eliminate the taxable maximum in years 2018 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) |
1.89 | 1.60 | 67% | 36% | |
E2.3 |
Eliminate the taxable maximum in years 2018 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) |
2.15 | 2.15 | 76% | 48% | |
E2.4 |
Eliminate the taxable maximum for years 2024 and later (phased in 2018-2024),
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 2017
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) | memo (Deutch 2015) | memo (Deutch 2010) |
2.18 | 2.35 | 77% | 52% | |
E2.5 |
Apply 12.4 percent payroll tax rate on earnings above $250,000 starting in
2018, 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) | memo (Sanders 2016) | memo (Sanders 2015) | memo (Sanders 2013) | memo (DeFazio 2011) |
2.19 | 2.46 | 77% | 55% | |
E2.6 |
Apply a 3 percent payroll tax on earnings above the current-law taxable
maximum starting in 2018. 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 | 21% | 14% | |
E2.7 |
Apply a 6 percent payroll tax on earnings above the current-law taxable
maximum starting in 2018. Do not provide benefit credit for earnings
above the current-law taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Wexler) |
1.19 | 1.25 | 42% | 28% | |
E2.8 |
Apply a 2 percent payroll tax on earnings above the current-law taxable
maximum for years 2020-2067, and a 3 percent rate for years 2068 and later.
Do not provide benefit credit for earnings above the current-law taxable
maximum.
graph | table | pdf-graph | pdf-table | memo (NRC/NAPA) |
0.44 | 0.63 | 16% | 14% | |
E2.9 |
Apply the following payroll tax rates above the current-law taxable
maximum: 2.0 percent in 2020, 3.0 percent in 2033, 3.5 percent in 2048,
4.5 percent in 2058, and 5.5 percent in 2068 and later. Do not provide
benefit credit for earnings above the current-law taxable maximum.
graph | table | pdf-graph | pdf-table | memo (NRC/NAPA) |
0.71 | 1.14 | 25% | 25% | |
E2.10 |
Eliminate the taxable maximum in years 2028 and later. Phase in elimination
by taxing all earnings above the current-law taxable maximum at: 1.24 percent
in 2019, 2.48 percent in 2020, and so on, up to 12.40 percent in 2028. Provide
benefit credit for earnings above the current-law taxable maximum. Create a
new bend point at the current-law taxable maximum with a 5 percent formula
factor applying above the new bend point.
graph | table | pdf-graph | pdf-table | memo (Harkin 2012) |
1.91 | 2.05 | 68% | 46% | |
E2.11 |
Eliminate the taxable maximum in years 2023 and later. Phase in elimination
by taxing all earnings above the current-law taxable maximum at: 2.48 percent
in 2019, 4.96 percent in 2020, and so on, up to 12.40 percent in 2023. 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 2017 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) |
2.09 | 2.16 | 74% | 48% | |
E2.12 |
Eliminate the taxable maximum in years 2029 and later. Phase in elimination
by taxing all earnings above the current-law taxable maximum at: 1.24 percent
in 2020, 2.48 percent in 2021, and so on, up to 12.40 percent in 2029. 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) |
1.92 | 2.15 | 68% | 48% | |
E2.13 |
Apply OASDI payroll tax rate on earnings above $400,000 starting in 2019,
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 2018 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 2015) | memo (Larson 2014) |
1.88 | 2.34 | 66% | 52% | |
E2.14 |
Apply OASDI payroll tax rate on earnings above $250,000 starting in
2019, 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 2018 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) |
2.11 | 2.34 | 75% | 52% | |
E2.15 |
Apply OASDI payroll tax rate on earnings above $300,000 starting in
2019, 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 2018 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+".
"AIME+".
graph | table | pdf-graph | pdf-table | memo (Crist) |
2.00 | 2.28 | 71% | 51% | |
E3.1 |
Increase the taxable maximum such that 90 percent of earnings would be subject
to the payroll tax (phased in 2018-2027). Provide benefit credit for earnings
up to the revised taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
0.77 | 0.64 | 27% | 14% | |
E3.2 |
Increase the taxable maximum such that 90 percent of earnings would be subject
to the payroll tax (phased in 2018-2027). Do not provide benefit credit for
additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Liebman, MacGuineas, Samwick) |
0.98 | 1.10 | 35% | 25% | |
E3.3 |
Increase the taxable maximum such that 90 percent of earnings would be subject
to the payroll tax (phased in 2019-2024). Provide benefit credit for earnings
up to the revised taxable maximum.
graph | table | pdf-graph | pdf-table | memo (AARP) |
0.77 | 0.64 | 27% | 14% | |
E3.4 |
Increase the taxable maximum from $106,800 to $115,200 (in 2009 AWI-indexed dollars),
or from $142,200 to $153,300 in 2020, phased in 2018-2020. Provide benefit credit for
earnings up to the revised taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Warshawsky) |
0.11 | 0.08 | 4% | 2% | |
E3.5 |
Increase the taxable maximum each year by an additional 2 percent beginning
in 2018 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) |
0.63 | 0.66 | 22% | 15% | |
E3.6 |
Increase the taxable maximum each year by an additional 2 percent beginning
in 2020 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) |
0.75 | 1.10 | 26% | 25% | |
E3.7 |
Increase the taxable maximum by an additional 2 percent per year beginning in
2019 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) |
0.64 | 0.77 | 23% | 17% | |
E3.8 |
Beginning in 2025, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $200,000 in 2017 (about $274,500 in 2025), with the threshold wage-indexed
after 2025. 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) |
0.20 | 0.16 | 7% | 4% | |
E3.9 |
Beginning in 2025, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $200,000 in 2017 (about $274,500 in 2025), with the threshold wage-indexed
after 2025. 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 | 9% | 7% | |
E3.10 |
Beginning in 2025, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $300,000 in 2017 (about $411,600 in 2025), with the threshold wage-indexed
after 2025. 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) |
0.14 | 0.12 | 5% | 3% | |
E3.11 |
Beginning in 2025, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $300,000 in 2017 (about $411,600 in 2025), with the threshold wage-indexed
after 2025. 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 | 7% | 5% | |
E3.12 |
Beginning in 2025, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $400,000 in 2017 (about $548,700 in 2025), with the threshold wage-indexed
after 2025. 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) |
0.12 | 0.09 | 4% | 2% | |
E3.13 |
Beginning in 2025, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $400,000 in 2017 (about $548,700 in 2025), with the threshold wage-indexed
after 2025. 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 2018. For the employee payroll tax (6.2 percent) and for benefit
credit purposes, beginning in 2018, 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) |
1.43 | 1.38 | 51% | 31% | |
E3.15 |
Increase the taxable maximum such that 90 percent of earnings are subject
to the payroll tax (phased in 2018-2027). In addition, apply a tax rate
of 6.2 percent for earnings above the revised taxable maximum (phased in
from 2018-2027). Provide benefit credit for earnings taxed up to the revised
taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Senate Special Committee on Aging) |
1.39 | 1.35 | 49% | 30% | |
E3.16 |
Beginning in 2019, apply 4 percent payroll tax rate on earnings above the
wage-indexed equivalent of $400,000 in 2015 (about $457,200 in 2019), with
the threshold wage-indexed after 2019. 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 $457,200
and $571,500 in 2019 (with thresholds wage-indexed after 2019); and (2) a
formula factor of 2 percent on this newly computed "AIME+".
graph | table | pdf-graph | pdf-table | memo (Larson 2017) | memo (Begich, Murray) |
0.30 | 0.33 | 11% | 7% | |
E3.17 |
Beginning in 2019, 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) |
1.06 | 1.47 | 37% | 33% | |
E3.18 |
Increase the taxable maximum linearly over 4 years to $212,700 for 2022.
After 2022, 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) |
0.57 | 0.64 | 20% | 14% | |
E3.19 |
Increase the taxable maximum such that 90 percent of earnings would be
subject to the payroll tax (phased in linearly from 2019-2024). 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) |
0.97 | 1.06 | 34% | 24% |