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 2021 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 3.54 percent of payroll and in annual balance for the 75th year is 4.34 percent of payroll. | ||||||
E1.1 |
Increase the payroll tax rate (currently 12.4 percent) to 16.1 percent in
2022 and later.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
3.61 | 3.73 | 102% | 86% | |
E1.2 |
Increase the payroll tax rate (currently 12.4 percent) to 16.4 percent in
2034-2063, and to 20.4 percent in years 2064 and later.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
4.52 | 7.92 | 128% | 182% | |
E1.4 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage
point each year from 2027-2046, until the rate reaches 14.4 percent in 2046
and later.
graph | table | pdf-graph | pdf-table | memo (Larson 2014) | memo (National Academy of Social Insurance) |
1.51 | 2.02 | 43% | 47% | |
E1.8 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage
point each year from 2024-2029, until the rate reaches 13.0 percent for
2029 and later.
graph | table | pdf-graph | pdf-table | memo (Moore 2022) | memo (Moore 2019) | memo (Moore 2013) |
0.55 | 0.61 | 16% | 14% | |
E1.9 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage point
each year from 2025-2048, until the rate reaches 14.8 percent in 2048 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) |
1.81 | 2.43 | 51% | 56% | |
E1.10 |
Increase the payroll tax rate by 0.1 percentage point per year for 2023 through
2032 so that it equals 13.4 percent for 2032 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) |
0.90 | 1.02 | 26% | 23% | |
E2.1 |
Eliminate the taxable maximum in years 2022 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) |
2.58 | 2.73 | 73% | 63% | |
E2.2 |
Eliminate the taxable maximum in years 2022 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) |
2.00 | 1.71 | 57% | 39% | |
E2.3 |
Eliminate the taxable maximum in years 2022 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) |
2.34 | 2.38 | 66% | 55% | |
E2.4 |
Eliminate the taxable maximum for years 2028 and later (phased in 2022-2028), 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 2021 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) |
2.39 | 2.59 | 68% | 60% | |
E2.5 |
Apply 12.4 percent payroll tax rate on earnings above $250,000 starting in 2022,
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) |
2.47 | 2.73 | 70% | 63% | |
E2.6 |
Apply a 3 percent payroll tax on earnings above the current-law taxable maximum
starting in 2022. Do not provide benefit credit for earnings above the current-law
taxable maximum.
graph | table | pdf-graph | pdf-table | memo (AARP) |
0.66 | 0.70 | 19% | 16% | |
E2.8 |
Apply a 2 percent payroll tax on earnings above the current-law taxable maximum for
years 2024-2071, and a 3 percent rate for years 2072 and later. Do not provide benefit
credit for earnings above the current-law taxable maximum.
graph | table | pdf-graph | pdf-table | memo (NRC/NAPA) |
0.49 | 0.69 | 14% | 16% | |
E2.11 |
Eliminate the taxable maximum in years 2027 and later. Phase in elimination by taxing
all earnings above the current-law taxable maximum at: 2.48 percent in 2023, 4.96 percent
in 2024, and so on, up to 12.40 percent in 2027. 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 2022 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) |
2.28 | 2.39 | 65% | 55% | |
E2.12 |
Eliminate the taxable maximum in years 2033 and later. Phase in elimination by taxing
all earnings above the current-law taxable maximum at: 1.24 percent in 2024, 2.48 percent
in 2025, and so on, up to 12.40 percent in 2033. 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 2022) | memo (Moore 2019) | memo (Moore 2013) |
2.09 | 2.38 | 59% | 55% | |
E2.13 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $400,000 starting in 2023,
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 2022 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) |
2.14 | 2.60 | 61% | 60% | |
E2.14 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $250,000 starting in 2023,
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 2022 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 2021) | memo (Lawson 2017) |
2.37 | 2.60 | 67% | 60% | |
E2.15 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $300,000 starting in 2023,
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 2022 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) |
2.26 | 2.53 | 64% | 58% | |
E3.1 |
Increase the taxable maximum such that 90 percent of earnings would be subject
to the payroll tax (phased in 2022-2031). Provide benefit credit for earnings
up to the revised taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board) |
0.77 | 0.62 | 22% | 14% | |
E3.2 |
Increase the taxable maximum such that 90 percent of earnings would be subject
to the payroll tax (phased in 2022-2031). Do not provide benefit credit for additional
earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Liebman, MacGuineas, Samwick) |
1.05 | 1.18 | 30% | 27% | |
E3.5 |
Increase the taxable maximum each year by an additional 2 percent beginning in 2022
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 | 0.66 | 18% | 15% | |
E3.6 |
Increase the taxable maximum each year by an additional 2 percent beginning
in 2024 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) |
0.81 | 1.18 | 23% | 27% | |
E3.7 |
Increase the taxable maximum by an additional 2 percent per year beginning in 2023
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) |
0.67 | 0.79 | 19% | 18% | |
E3.8 |
Beginning in 2029, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $200,000 in 2017 (about $305,400 in 2029), with the threshold wage-indexed
after 2029. 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 | 6% | 4% | |
E3.9 |
Beginning in 2029, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $200,000 in 2017 (about $305,400 in 2029), with the threshold wage-indexed
after 2029. 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) |
0.28 | 0.33 | 8% | 8% | |
E3.10 |
Beginning in 2029, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $300,000 in 2017 (about $458,400 in 2029), with the threshold wage-indexed
after 2029. 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) |
0.15 | 0.12 | 4% | 3% | |
E3.11 |
Beginning in 2029, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $300,000 in 2017 (about $458,400 in 2029), with the threshold wage-indexed
after 2029. 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) |
0.21 | 0.25 | 6% | 6% | |
E3.12 |
Beginning in 2029, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $400,000 in 2017 (about $611,100 in 2029), with the threshold wage-indexed
after 2029. 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 | 3% | 2% | |
E3.13 |
Beginning in 2029, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $400,000 in 2017 (about $611,100 in 2029), with the threshold wage-indexed
after 2029. 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) |
0.17 | 0.20 | 5% | 5% | |
E3.14 |
Eliminate the taxable maximum for the employer payroll tax (6.2 percent) beginning in
2022. For the employee payroll tax (6.2 percent) and for benefit credit purposes, beginning
in 2022, 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) |
1.49 | 1.40 | 42% | 32% | |
E3.15 |
Increase the taxable maximum such that 90 percent of earnings are subject to the payroll
tax (phased in 2022-2031). In addition, apply a tax rate of 6.2 percent for earnings above
the revised taxable maximum (phased in from 2022-2031). Provide benefit credit for earnings
taxed up to the revised taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Senate Special Committee on Aging) |
1.44 | 1.36 | 41% | 31% | |
E3.16 |
Beginning in 2023, apply 4 percent payroll tax rate on earnings above the wage-indexed
equivalent of $400,000 in 2015 (about $526,200 in 2023), with the threshold wage-indexed
after 2023. 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 $526,200
and $657,900 in 2023 (with thresholds wage-indexed after 2023); and (2) a formula factor
of 2 percent on this newly computed "AIME+".
graph | table | pdf-graph | pdf-table | memo (Begich, Murray) |
0.35 | 0.38 | 10% | 9% | |
E3.17 |
Beginning in 2023, 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 | 1.49 | 30% | 34% | |
E3.18 |
Increase the taxable maximum linearly over 4 years to $248,400 for 2026. After 2026,
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) |
0.61 | 0.65 | 17% | 15% | |
E3.19 |
Increase the taxable maximum such that 90 percent of earnings would be subject to the
payroll tax (phased in linearly from 2023-2028). 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) |
1.02 | 1.09 | 29% | 25% |