Description of Proposed Provisions:
Provisions Affecting Payroll Taxes
Estimates based on the intermediate assumptions of
the 2018 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 2.84 percent of payroll and in annual balance for the 75th year is 4.32 percent of payroll. | ||||||
E1.1 |
Increase the payroll tax rate (currently 12.4 percent) to 15.4 percent
in 2019 and later.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
2.85 | 2.97 | 100% | 69% | |
E1.2 |
Increase the payroll tax rate (currently 12.4 percent) to 15.5 percent
in 2031-2060, and to 18.6 percent in years 2061 and later.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
3.33 | 5.99 | 117% | 139% | |
E1.4 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage
point each year from 2024-2043, until the rate reaches 14.4 percent in 2043
and later.
graph | table | pdf-graph | pdf-table | memo (Larson 2014) | memo (National Academy of Social Insurance) |
1.45 | 1.98 | 51% | 46% | |
E1.8 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage
point each year from 2021-2026, until the rate reaches 13.0 percent for
2026 and later.
graph | table | pdf-graph | pdf-table | memo (Moore) |
0.54 | 0.60 | 19% | 14% | |
E1.9 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage
point each year from 2022-2045, until the rate reaches 14.8 percent in 2045.
Then increase the payroll tax rate an additional 0.1 percentage point in
each year from 2084-2088, until the rate reaches 15.3 percent for 2088 and
later.
graph | table | pdf-graph | pdf-table | memo (Larson, Blumenthal, Van Hollen 2019) | memo (Larson 2017) | memo (Larson 2015) |
1.77 | 2.85 | 62% | 66% | |
E1.10 |
Increase the payroll tax rate by 0.1 percentage point per year for 2020
through 2029 so that it equals 13.4 percent for 2029 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% | 23% | |
E2.1 |
Eliminate the taxable maximum in years 2019 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% | 57% | |
E2.2 |
Eliminate the taxable maximum in years 2019 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) |
1.93 | 1.68 | 68% | 39% | |
E2.3 |
Eliminate the taxable maximum in years 2019 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) |
2.16 | 2.17 | 76% | 50% | |
E2.4 |
Eliminate the taxable maximum for years 2025 and later (phased in 2019-2025),
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 2018
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 | 2.35 | 77% | 54% | |
E2.5 |
Apply 12.4 percent payroll tax rate on earnings above $250,000
starting in 2019, 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) |
2.20 | 2.46 | 77% | 57% | |
E2.6 |
Apply a 3 percent payroll tax on earnings above the current-law
taxable maximum starting in 2019. 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 | 21% | 15% | |
E2.8 |
Apply a 2 percent payroll tax on earnings above the current-law taxable maximum
for years 2021-2068, and a 3 percent rate for years 2069 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% | 15% | |
E2.11 |
Eliminate the taxable maximum in years 2024 and later. Phase in elimination by
taxing all earnings above the current-law taxable maximum at: 2.48 percent in
2020, 4.96 percent in 2021, and so on, up to 12.40 percent in 2024. 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; 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) |
2.11 | 2.20 | 74% | 51% | |
E2.12 |
Eliminate the taxable maximum in years 2030 and later. Phase in elimination
by taxing all earnings above the current-law taxable maximum at: 1.24 percent
in 2021, 2.48 percent in 2022, and so on, up to 12.40 percent in 2030. 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) |
1.93 | 2.17 | 68% | 50% | |
E2.13 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $400,000
starting in 2020, 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 2019
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 2019) | memo (Larson 2017) | memo (Larson 2015) | memo (Larson 2014) |
1.90 | 2.35 | 67% | 54% | |
E2.14 |
Apply OASDI 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. 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; and
(2) a formula factor of 2 percent on this newly computed "AIME+".
graph | table | pdf-graph | pdf-table | memo (Lawson) |
2.13 | 2.35 | 75% | 54% | |
E2.15 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $300,000
starting in 2020, 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 2019
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 | 2.30 | 71% | 53% | |
E3.1 |
Increase the taxable maximum such that 90 percent of earnings would
be subject to the payroll tax (phased in 2019-2028). Provide benefit
credit for earnings up to the revised taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
0.79 | 0.68 | 28% | 16% | |
E3.2 |
Increase the taxable maximum such that 90 percent of earnings
would be subject to the payroll tax (phased in 2019-2028). Do
not provide benefit credit for additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Liebman, MacGuineas, Samwick) |
0.98 | 1.11 | 35% | 26% | |
E3.5 |
Increase the taxable maximum each year by an additional 2 percent
beginning in 2019 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) |
0.65 | 0.70 | 23% | 16% | |
E3.6 |
Increase the taxable maximum each year by an additional 2 percent
beginning in 2021 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% | 26% | |
E3.7 |
Increase the taxable maximum by an additional 2 percent per year
beginning in 2020 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) |
0.66 | 0.80 | 23% | 19% | |
E3.8 |
Beginning in 2026, apply 2 percent payroll tax rate on earnings
over the wage-indexed equivalent of $200,000 in 2017 (about $279,300
in 2026), with the threshold wage-indexed after 2026. 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 | 0.17 | 7% | 4% | |
E3.9 |
Beginning in 2026, apply 2 percent payroll tax rate on earnings
over the wage-indexed equivalent of $200,000 in 2017 (about $279,300
in 2026), with the threshold wage-indexed after 2026. 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 2026, apply 2 percent payroll tax rate on earnings
over the wage-indexed equivalent of $300,000 in 2017 (about $419,100
in 2026), with the threshold wage-indexed after 2026. 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 2026, apply 2 percent payroll tax rate on earnings over
the wage-indexed equivalent of $300,000 in 2017 (about $419,100 in 2026),
with the threshold wage-indexed after 2026. 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 | 0.22 | 6% | 5% | |
E3.12 |
Beginning in 2026, apply 2 percent payroll tax rate on earnings over
the wage-indexed equivalent of $400,000 in 2017 (about $558,900 in 2026),
with the threshold wage-indexed after 2026. 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 | 0.10 | 4% | 2% | |
E3.13 |
Beginning in 2026, apply 2 percent payroll tax rate on earnings over
the wage-indexed equivalent of $400,000 in 2017 (about $558,900 in 2026),
with the threshold wage-indexed after 2026. 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 2019. For the employee payroll tax (6.2 percent) and for
benefit credit purposes, beginning in 2019, 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) |
1.45 | 1.41 | 51% | 33% | |
E3.15 |
Increase the taxable maximum such that 90 percent of earnings are
subject to the payroll tax (phased in 2019-2028). In addition, apply
a tax rate of 6.2 percent for earnings above the revised taxable
maximum (phased in from 2019-2028). Provide benefit credit for earnings
taxed up to the revised taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Senate Special Committee on Aging) |
1.41 | 1.39 | 50% | 32% | |
E3.16 |
Beginning in 2020, apply 4 percent payroll tax rate on earnings above
the wage-indexed equivalent of $400,000 in 2015 (about $462,300 in 2020),
with the threshold wage-indexed after 2020. 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 $462,300 and $578,100 in 2020 (with thresholds wage-indexed after
2020); 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 | 11% | 8% | |
E3.17 |
Beginning in 2020, 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) |
1.08 | 1.51 | 38% | 35% | |
E3.18 |
Increase the taxable maximum linearly over 4 years to $222,600 for 2023.
After 2023, 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) |
0.63 | 0.70 | 22% | 16% | |
E3.19 |
Increase the taxable maximum such that 90 percent of earnings would
be subject to the payroll tax (phased in linearly from 2020-2025).
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 | 1.04 | 34% | 24% |