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 2023 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 3.61 percent of payroll and in annual balance for the 75th year is 4.35 percent of payroll. | ||||||
| E1.1 |
Increase the payroll tax rate (currently 12.4 percent) to 16.2 percent
in 2024 and later.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board 2005) |
3.70 | 3.81 | 102% | 88% | |
| E1.2 |
Increase the payroll tax rate (currently 12.4 percent) to 16.2 percent in
2034-2063, and to 20.0 percent in years 2064 and later.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board 2005) |
4.49 | 7.51 | 125% | 173% | |
| E1.4 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage point
each year from 2029-2048, until the rate reaches 14.4 percent in 2048 and later.
graph | table | pdf-graph | pdf-table | memo (Larson 2014) | memo (National Academy of Social Insurance 2009) |
1.50 | 2.01 | 41% | 46% | |
| E1.8 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage point
each year from 2026-2031, until the rate reaches 13.0 percent for 2031 and later.
graph | table | pdf-graph | pdf-table | memo (Moore 2023) | memo (Moore 2022) | memo (Moore 2019) | memo (Moore 2013) |
0.55 | 0.61 | 15% | 14% | |
| E1.9 |
Increase the payroll tax rate (currently 12.4 percent) by 0.1 percentage point
each year from 2027-2050, until the rate reaches 14.8 percent in 2050 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 | 2.41 | 50% | 56% | |
| E1.10 |
Increase the payroll tax rate by 0.1 percentage point per year for 2025
through 2034 so that it equals 13.4 percent for 2034 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) |
0.89 | 1.01 | 25% | 23% | |
| E2.1 |
Eliminate the taxable maximum in years 2024 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) |
2.54 | 2.60 | 70% | 60% | |
| E2.2 |
Eliminate the taxable maximum in years 2024 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) |
1.97 | 1.60 | 55% | 37% | |
| E2.4 |
Eliminate the taxable maximum for years 2030 and later (phased in 2024-2030),
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 2023
that were in excess of that year's current-law taxable maximum; (2) a new bend
point equal to $9,360 in 2024, indexed by wages after 2024; 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 2022) | memo (Deutch, Hirono 2019) | memo (Deutch, Hirono 2017) | memo (Deutch 2015) | memo (Deutch 2010) |
2.37 | 2.49 | 66% | 57% | |
| E2.5 |
Apply 12.4 percent payroll tax rate on earnings above $250,000 starting in
2024, 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) |
2.47 | 2.60 | 68% | 60% | |
| E2.11 |
Eliminate the taxable maximum in years 2029 and later. Phase in elimination
by taxing all earnings above the current-law taxable maximum at: 2.48 percent
in 2025, 4.96 percent in 2026, and so on, up to 12.40 percent in 2029. 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 5 percent on this newly computed "AIME+".
graph | table | pdf-graph | pdf-table | memo (Sanchez 2016) | memo (Schatz 2015) | memo (Harkin 2013) |
2.25 | 2.27 | 62% | 52% | |
| E2.12 |
Eliminate the taxable maximum in years 2035 and later. Phase in elimination
by taxing all earnings above the current-law taxable maximum at: 1.24 percent
in 2026, 2.48 percent in 2027, and so on, up to 12.40 percent in 2035. 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) |
2.05 | 2.22 | 57% | 51% | |
| E2.13 |
Apply OASDI 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.
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 (Larson, Blumenthal, Van Hollen September 2019) | memo (Larson, Blumenthal, Van Hollen January 2019) | memo (Larson 2017) | memo (Larson 2015) | memo (Larson 2014) |
2.18 | 2.47 | 60% | 57% | |
| E2.14 |
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.
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 (Lawson 2021) | memo (Lawson 2017) |
2.37 | 2.47 | 66% | 57% | |
| E2.15 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $300,000 starting
in 2025, 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 2024 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 | 2.40 | 63% | 55% | |
| E2.16 |
Apply OASDI 12.4 percent payroll tax rate on earnings above $250,000 starting
in 2024, 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 2023
by amounts ranging from 0.6 percent for 2024 to 0.9 percent for 2034 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 2023 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) |
2.33 | 2.40 | 65% | 55% | |
| E2.17 |
Apply 12.4 percent payroll tax rate on earnings above $400,000 starting in 2024
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) |
2.26 | 2.60 | 63% | 60% | |
| E2.18 |
Apply the combined OASDI payroll tax rate on covered earnings above $400,000
paid in 2025 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
2024 by amounts ranging from 0.5 percent for 2025 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) |
2.16 | 2.47 | 60% | 57% | |
| E3.1 |
Increase the taxable maximum such that 90 percent of earnings would be subject
to the payroll tax (phased in 2024-2033). Provide benefit credit for earnings
up to the revised taxable maximum.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board 2005) |
0.69 | 0.40 | 19% | 9% | |
| E3.2 |
Increase the taxable maximum such that 90 percent of earnings would be subject
to the payroll tax (phased in 2024-2033). Do not provide benefit credit for
additional earnings taxed.
graph | table | pdf-graph | pdf-table | memo (Liebman, MacGuineas, Samwick 2005) |
1.07 | 1.18 | 30% | 27% | |
| E3.5 |
Increase the taxable maximum each year by an additional 2 percent beginning in
2024 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) |
0.59 | 0.45 | 16% | 10% | |
| E3.6 |
Increase the taxable maximum each year by an additional 2 percent beginning in
2026 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 | 1.18 | 23% | 27% | |
| E3.7 |
Increase the taxable maximum by an additional 2 percent per year beginning in
2025 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) |
0.66 | 0.76 | 18% | 18% | |
| E3.8 |
Beginning in 2031, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $200,000 in 2017 (about $348,300 in 2031), with the threshold wage-indexed
after 2031. 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) |
0.19 | 0.14 | 5% | 3% | |
| E3.9 |
Beginning in 2031, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $200,000 in 2017 (about $348,300 in 2031), with the threshold wage-indexed
after 2031. 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% | 7% | |
| E3.10 |
Beginning in 2031, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $300,000 in 2017 (about $522,300 in 2031), with the threshold wage-indexed
after 2031. 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) |
0.14 | 0.10 | 4% | 2% | |
| E3.11 |
Beginning in 2031, apply 2 percent payroll tax rate on earnings over the
wage-indexed equivalent of $300,000 in 2017 (about $522,300 in 2031), with
the threshold wage-indexed after 2031. 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 | 5% | 5% | |
| E3.12 |
Beginning in 2031, apply 2 percent payroll tax rate on earnings over the
wage-indexed equivalent of $400,000 in 2017 (about $696,600 in 2031), with
the threshold wage-indexed after 2031. 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) |
0.11 | 0.08 | 3% | 2% | |
| E3.13 |
Beginning in 2031, apply 2 percent payroll tax rate on earnings over the
wage-indexed equivalent of $400,000 in 2017 (about $696,600 in 2031), with
the threshold wage-indexed after 2031. 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
in 2024. For the employee payroll tax (6.2 percent) and for benefit credit purposes,
beginning in 2024, 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) |
1.46 | 1.19 | 40% | 27% | |
| E3.15 |
Increase the taxable maximum such that 90 percent of earnings are subject
to the payroll tax (phased in 2024-2033). In addition, apply a tax rate of
6.2 percent for earnings above the revised taxable maximum (phased in from
2024-2033). 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) |
1.37 | 1.13 | 38% | 26% | |
| E3.16 |
Beginning in 2025, apply 4 percent payroll tax rate on earnings above the
wage-indexed equivalent of $400,000 in 2015 (about $589,500 in 2025), with
the threshold wage-indexed after 2025. 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 $589,500 and $736,800
in 2025 (with thresholds wage-indexed after 2025); 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% | 8% | |
| E3.17 |
Beginning in 2025, 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) |
0.98 | 1.18 | 27% | 27% | |
| E3.18 |
Increase the taxable maximum linearly over 4 years to $279,900 for 2028. After 2028,
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) |
0.55 | 0.48 | 15% | 11% | |
| E3.19 |
Increase the taxable maximum such that 90 percent of earnings would be subject
to the payroll tax (phased in linearly from 2025-2030). 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) |
1.02 | 1.05 | 28% | 24% | |