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 2024 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 3.50 percent of payroll and in annual balance for the 75th year is 4.64 percent of payroll. | ||||||
| E1.1 |
Increase the payroll tax rate (currently 12.4 percent) to 16.0 percent in 2025 and later.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board 2005) |
3.51 | 3.62 | 100% | 78% | |
| E1.2 |
Increase the payroll tax rate (currently 12.4 percent) to 15.9 percent in
2035-2064, and to 19.4 percent in years 2065 and later.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board 2005) |
4.13 | 6.95 | 118% | 150% | |
| E1.4 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage point
each year from 2030-2049, until the rate reaches 14.4 percent in 2049 and later.
graph | table | pdf-graph | pdf-table | memo (Larson 2014) | memo (National Academy of Social Insurance 2009) |
1.50 | 2.02 | 43% | 44% | |
| E1.8 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage point
each year from 2027-2032, until the rate reaches 13.0 percent for 2032 and later.
graph | table | pdf-graph | pdf-table | memo (Moore 2023) | memo (Moore 2022) | memo (Moore 2019) | memo (Moore 2013) |
0.55 | 0.61 | 16% | 13% | |
| E1.9 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage point
each year from 2028-2051, until the rate reaches 14.8 percent in 2051 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) |
1.79 | 2.42 | 51% | 52% | |
| E1.10 |
Increase the payroll tax rate by 0.1 percentage point per year for 2026
through 2035 so that it equals 13.4 percent for 2035 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 | 1.01 | 26% | 22% | |
| E2.1 |
Eliminate the taxable maximum in years 2025 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 2005) |
2.55 | 2.60 | 73% | 56% | |
| E2.2 |
Eliminate the taxable maximum in years 2025 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 2005) |
1.86 | 1.37 | 53% | 29% | |
| E2.4 |
Eliminate the taxable maximum for years 2031 and later (phased in 2025-2031),
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 2024 that were
in excess of that year's current-law taxable maximum; (2) a new bend point equal
to $9,770 in 2025, indexed by wages after 2025; 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 (Hirono, Tokuda 2024) | memo (Deutch, Hirono 2022) | memo (Deutch, Hirono 2019) | memo (Deutch, Hirono 2017) | memo (Deutch 2015) | memo (Deutch 2010) |
2.37 | 2.49 | 68% | 54% | |
| E2.5 |
Apply 12.4 percent payroll tax rate on earnings above $250,000 starting in 2025,
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 2023) | memo (Sanders, DeFazio 2022) | memo (Sanders, DeFazio 2019) | memo (Sanders, DeFazio 2017) | memo (Sanders 2016) | memo (Sanders 2015) | memo (Sanders 2013) | memo (DeFazio 2011) |
2.49 | 2.60 | 71% | 56% | |
| E2.11 |
Eliminate the taxable maximum in years 2030 and later. Phase in elimination
by taxing all earnings above the current-law taxable maximum at: 2.48 percent
in 2026, 4.96 percent in 2027, and so on, up to 12.40 percent in 2030. 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 2025 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 2016) | memo (Schatz 2015) | memo (Harkin 2013) |
2.22 | 2.20 | 64% | 47% | |
| E2.12 |
Eliminate the taxable maximum in years 2036 and later. Phase in elimination
by taxing all earnings above the current-law taxable maximum at: 1.24 percent
in 2027, 2.48 percent in 2028, and so on, up to 12.40 percent in 2036. 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 2023) | memo (Moore 2022) | memo (Moore 2019) | memo (Moore 2013) |
2.01 | 2.15 | 57% | 46% | |
| E2.13 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $400,000 starting
in 2026, 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 2025 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) |
2.20 | 2.45 | 63% | 53% | |
| E2.14 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $250,000 starting
in 2026, 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 2025 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) |
2.38 | 2.44 | 68% | 53% | |
| E2.15 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $300,000 starting
in 2026, 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 2025 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 2017) |
2.28 | 2.36 | 65% | 51% | |
| E2.16 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $250,000 starting
in 2025, and tax all earnings once the current-law taxable maximum exceeds $250,000.
Increase the computed level of the SSA average wage index for years after 2024
by amounts ranging from 0.7 percent for 2025 to 0.9 percent for 2033 and later.
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 2024 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 (Craig 2024) | memo (Craig 2022) |
2.34 | 2.38 | 67% | 51% | |
| E2.17 |
Apply 12.4 percent payroll tax rate on earnings above $400,000 starting in
2025 and tax all earnings once the current-law taxable maximum exceeds $400,000.
Do not provide benefit credit for additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Whitehouse, Boyle 2023) |
2.30 | 2.60 | 66% | 56% | |
| E2.18 |
Apply the combined OASDI payroll tax rate on covered earnings above $400,000
paid in 2026 and later, and tax all covered earnings once the current-law taxable
maximum exceeds $400,000. Increase the computed level of the AWI for years
after 2025 by amounts ranging from 0.5 percent for 2026 to 0.9 percent for
2047 and later. Credit the additional earnings taxed for benefit purposes by:
(a) calculating a second average indexed monthly earnings ("AIME+") reflecting
only earnings taxed above the current-law taxable maximum, (b) applying a 1
percent factor on this newly computed "AIME+" to develop a second component
of the PIA, and (c) adding this second component to the current-law PIA.
graph | table | pdf-graph | pdf-table | memo (Larson 2023) |
2.18 | 2.46 | 62% | 53% | |
| E3.1 |
Increase the taxable maximum such that 90 percent of earnings would be subject
to the payroll tax (phased in 2025-2034). Provide benefit credit for earnings
up to the revised taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board 2005) |
0.84 | 0.69 | 24% | 15% | |
| E3.2 |
Increase the taxable maximum such that 90 percent of earnings would be
subject to the payroll tax (phased in 2025-2034). Do not provide benefit
credit for additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Liebman, MacGuineas, Samwick 2005) |
1.08 | 1.19 | 31% | 26% | |
| E3.5 |
Increase the taxable maximum each year by an additional 2 percent beginning
in 2025 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 2009) |
0.70 | 0.72 | 20% | 16% | |
| E3.6 |
Increase the taxable maximum each year by an additional 2 percent beginning in
2027 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 2010) |
0.83 | 1.19 | 24% | 26% | |
| E3.7 |
Increase the taxable maximum by an additional 2 percent per year beginning in
2026 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 2010) |
0.72 | 0.87 | 21% | 19% | |
| E3.8 |
Beginning in 2032, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $200,000 in 2017 (about $366,000 in 2032), with the threshold wage-indexed
after 2032. 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 2010) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.18 | 0.10 | 5% | 2% | |
| E3.9 |
Beginning in 2032, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $200,000 in 2017 (about $366,000 in 2032), with the threshold wage-indexed
after 2032. Do not provide benefit credit for additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Johnson, Brady, Ryan 2010) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.26 | 0.30 | 7% | 6% | |
| E3.10 |
Beginning in 2032, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $300,000 in 2017 (about $549,000 in 2032), with the threshold wage-indexed
after 2032. 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 2010) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.13 | 0.07 | 4% | 2% | |
| E3.11 |
Beginning in 2032, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $300,000 in 2017 (about $549,000 in 2032), with the threshold wage-indexed
after 2032. Do not provide benefit credit for additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Johnson, Brady, Ryan 2010) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.19 | 0.22 | 6% | 5% | |
| E3.12 |
Beginning in 2032, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $400,000 in 2017 (about $732,000 in 2032), with the threshold wage-indexed
after 2032. 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 2010) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.10 | 0.06 | 3% | 1% | |
| E3.13 |
Beginning in 2032, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $400,000 in 2017 (about $732,000 in 2032), with the threshold wage-indexed
after 2032. Do not provide benefit credit for additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Johnson, Brady, Ryan 2010) (includes similar provisions with 3 percent and 4 percent payroll tax rates) |
0.16 | 0.18 | 4% | 4% | |
| E3.14 |
Eliminate the taxable maximum for the employer payroll tax (6.2 percent) beginning
'n 2025. For the employee payroll tax (6.2 percent) and for benefit credit purposes,
beginning in 2025, 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 2009) |
1.56 | 1.45 | 45% | 31% | |
| E3.15 |
Increase the taxable maximum such that 90 percent of earnings are subject to the
payroll tax (phased in 2025-2034). In addition, apply a tax rate of 6.2 percent
for earnings above the revised taxable maximum (phased in from 2025-2034). Provide
benefit credit for earnings taxed up to the revised taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Senate Special Committee on Aging 2010) |
1.52 | 1.41 | 43% | 30% | |
| E3.16 |
Beginning in 2026, apply 4 percent payroll tax rate on earnings above the wage-indexed
equivalent of $400,000 in 2015 (about $612,900 in 2026), with the threshold wage-indexed
after 2026. 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 $612,900
and $766,200 in 2026 (with thresholds wage-indexed after 2026); and (2) a formula factor
of 2 percent on this newly computed "AIME+".
graph | table | pdf-graph | pdf-table | memo (Begich, Murray 2014) |
0.32 | 0.33 | 9% | 7% | |
| E3.17 |
Beginning in 2026, 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 2016) |
1.13 | 1.56 | 32% | 34% | |
| E3.18 |
Increase the taxable maximum linearly over 4 years to $291,000 for 2029. After 2029,
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) |
0.66 | 0.72 | 19% | 16% | |
| E3.19 |
Increase the taxable maximum such that 90 percent of earnings would be subject to
the payroll tax (phased in linearly from 2026-2031). 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 2016) |
1.05 | 1.11 | 30% | 24% | |