Social Security: Raising or Eliminating the
Taxable Earnings Base
Janemarie Mulvey
Specialist in Aging and Income Security
September 24, 2010
Congressional Research Service
7-5700
www.crs.gov
RL32896
CRS Report for Congress
P
repared for Members and Committees of Congress
Social Security: Raising or Eliminating the Taxable Earnings Base
Summary
Social Security taxes are levied on covered earnings up to a maximum level set each year. In
2010, this maximum—or what is referred to as the taxable earnings base—is $106,800. The
taxable earnings base serves as both a cap on contributions and a cap on benefits. As a
contribution base, it establishes the maximum amount of each worker’s earnings that is subject to
the payroll tax. As a benefit base, it establishes the maximum amount of earnings used to
calculate benefits.
Since 1982, the Social Security taxable earnings base has risen at the same rate as average wages
in the economy. However, because of increasing earnings inequality, the percentage of covered
earnings that are taxable has decreased from 90% in 1982 to 85% in 2005. The percentage of
covered earnings that is taxable is projected to decline to about 83% for 2014 and later. Because
the cap was indexed to the average growth in wages, the share of the population below the cap
has remained relatively stable at roughly 94%. Of the 9.5 million Americans with earnings above
the base, roughly 80% are men and only 9% had any earnings from self-employment income.
New Jersey has the highest share of the population above the maximum (11.6%) and South
Dakota has the lowest share (2.1%).
CRS estimated the potential impact of eliminating the taxable wage base on future benefits and
taxes. If the base were removed in 2013, CRS estimates that by 2035, 21% of beneficiaries would
have paid some additional payroll taxes over the course of their lifetimes. However, the average
change in taxes and benefits would be small. Looking only at individuals who would pay any
additional taxes over the course of their lifetimes, at the median, total lifetime tax payments
would rise by 3% and benefits would increase by 2% relative to current law. In general, those in
the highest income groups would have the largest changes in both tax payments and in benefits
relative to current law.
Raising or eliminating the cap on wages that are subject to taxes could reduce the long-range
deficit in the Social Security Trust Funds. For example, if the maximum taxable earnings amount
had been raised in 2005 from $90,000 to $150,000—roughly the level needed to cover 90% of all
earnings—it would have eliminated roughly 40% of the long-range shortfall in Social Security. If
all earnings were subject to the payroll tax, but the base was retained for benefit calculations, the
Social Security Trust Funds would remain solvent for the next 75 years. However, having
different bases for contributions and benefits would weaken the traditional link between the taxes
workers pay into the system and the benefits they receive.
This report will be updated as legislative activity warrants.
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Social Security: Raising or Eliminating the Taxable Earnings Base
Contents
Background ................................................................................................................................ 1
Origin and History of the Taxable Earnings Base................................................................... 1
The Taxable Earnings Base ......................................................................................................... 2
The Taxable Earnings Base Today ......................................................................................... 2
The Taxable Earnings Base Over Time .................................................................................. 4
The Taxable Earnings Base by State ...................................................................................... 5
The Taxable Earnings Base by Employment Status and Gender ............................................. 5
The Future of the Taxable Earnings Base............................................................................... 6
Projections of the Share of the Population Earning Above the Taxable Wage Base
Over Their Lifetime ........................................................................................................... 6
Impact of Raising or Eliminating the Taxable Earnings Base ....................................................... 8
Impact on Individuals’ Lifetime Payroll Taxes and Social Security Benefits if the
Taxable Wage Base Were Eliminated.................................................................................. 8
Aggregate Changes ......................................................................................................... 9
Changes by Income Group ............................................................................................ 10
Changes by Gender ....................................................................................................... 11
Impact on the Social Security Trust Funds........................................................................... 12
Option 1: Cover 90% of Earnings and Pay Higher Benefits ........................................... 13
Option 2: Cover All Earnings and Pay Higher Benefits.................................................. 13
Option 3: Cover All Earnings and Pay No Additional Benefits....................................... 14
Impact on Federal Revenue ................................................................................................. 14
Impact on Workers’ and Employers’ Behavior ..................................................................... 15
Legislation in the 111th Congress ............................................................................................... 15
Arguments For and Against Raising or Eliminating the Base ..................................................... 15
Arguments For .................................................................................................................... 15
Arguments Against.............................................................................................................. 17
Figures
Figure 1. Share of Earnings and Workers Below the Taxable Earnings Base, 1950-2007 .............. 5
Figure 2. Share of the Population with Earnings Above the Taxable Wage Base Over
Their Lifetime.......................................................................................................................... 7
Figure 3. Share of Beneficiaries in 2035 with Tax and Benefit Increases Compared with
Current Law If the Taxable Earnings Base Is Eliminated, by Level of Increase ....................... 10
Figure 4. Share of Beneficiaries in 2035 with Higher Payroll Taxes or Benefits Compared
with Current Law If the Taxable Earnings Base Is Eliminated, by Highest and Lowest
Quintile.................................................................................................................................. 11
Figure 5. Share of Male and Female Beneficiaries in 2035 with Higher Payroll Taxes or
Benefits Compared with Current Law If the Taxable Earnings Base Is Eliminated, by
Gender ................................................................................................................................... 12
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Social Security: Raising or Eliminating the Taxable Earnings Base
Tables
Table 1. 2010 Social Security and Medicare Tax Rates and Maximum Taxable Earnings,
Maximum Taxes Paid, and Maximum Retirement Benefits....................................................... 3
Table 2. Impact on the Social Security Trust Funds of Raising or Eliminating the Social
Security Taxable Earnings Base.............................................................................................. 13
Table 3. Revenue Impact of Raising the Social Security Taxable Earnings Base......................... 14
Table A-1. Social Security and Medicare Tax Rates and Taxable Earnings Bases, 1937-
2010 ...................................................................................................................................... 18
Table A-2. The Number and Percentage of Covered Workers with Social Security Taxable
Earnings over the Taxable Earnings Base of $97,500, by State, 2007 ...................................... 21
Table A-3. Number and Percentage of Workers Above the Taxable Earnings Base of
$97,500 by Type of Earnings and Sex, 2007 ........................................................................... 23
Appendixes
Appendix. Taxable Earnings Bases and Worker Income: Detailed Tables ................................... 18
Contacts
Author Contact Information ...................................................................................................... 23
Acknowledgments .................................................................................................................... 23
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Social Security: Raising or Eliminating the Taxable Earnings Base
Background
Since the beginning of the program, Social Security taxes have been levied on covered earnings
up to a maximum level set each year, referred to as the taxable earnings base. Social Security was
enacted in 1935, and the Social Security payroll tax was first levied in 1937. From 1937 through
1949, the tax rate was 1% (on employee and employer, each) on earnings up to $3,000 a year.
Since that time the rate has risen to 6.2% and the taxable earnings base has been increased to help
meet the financing needs of the program, and to keep up to date with changing earnings levels.
Since 1982, the Social Security earnings base has risen at the same rate as wages in the economy.
By law, the Commissioner of Social Security is required to raise the base whenever an automatic
benefit increase—cost of living adjustment (COLA)—is granted to Social Security recipients,
assuming wages have risen. The increase in the base from 2009 to in 2010 is based on the
increase in average wages from 2007 to 2008.1
Origin and History of the Taxable Earnings Base
In 1935, the designers of Social Security, President Franklin Roosevelt’s Committee on Economic
Security, did not recommend a maximum level of taxable earnings in its plan, and the draft bill
that President Roosevelt sent to the Hill did not include one. The bill emphasized who was to be
covered by the system, not how much wages should be taxed. Being in the midst of the
Depression, the Administration’s attention was on the large number of aged people living in
poverty. Its goal in proposing a Social Security program was to complement public assistance
measures (Old-Age Assistance) in its plan. The plan offered immediate cash aid to the aged poor
and created an earnings-replacement system intended to lessen the need for welfare benefits in the
long run. It was recognized that the new system would not be sufficient to provide full income in
retirement, but would provide a “core” benefit as a floor of protection against poverty. Not
concerned about high-income retirees, the Administration’s proposal exempted non-manual
workers earning $250 or more a month from coverage (i.e., $3,000 on an annual basis). Manual
workers were to be covered regardless of their earnings, but few had earnings above this level.
It was the Social Security bill reported by the House Ways and Means Committee that clearly
established a maximum taxable amount, which it set at $3,000 per year.2 In addition, the
committee dropped the exemption for non-manual workers with high earnings. The committee’s
report and floor statements made at the time give no clear record as to the reasoning for the
taxable limit, but concerns about tax equity and attaining as much program coverage of the
workforce as possible were suggested as factors for rejecting the high-earner exemption. Not
covering them meant that they would not pay the tax where lower-wage earners would, and
coverage would be erratic for workers whose earnings fluctuated above and below the $250
monthly threshold.
Although tax policy concerns were raised in later years, with a higher base preferred by those
seeking a more proportional tax system, there was little if any serious attention given to
1 The reason for the two-year lag in reflecting increases in average wages in the taxable earnings base is that average
wages for the year immediately prior to the year of the increase simply are not known in time.
2 The maximum for a worker was to be $3,000 per year per employer, so that, under the original legislation enacted in
1935, someone could have paid tax on more than $3,000 in earnings per year (and received benefits from all such
wages) if they worked for more than one employer.
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Social Security: Raising or Eliminating the Taxable Earnings Base
eliminating the base entirely. In the late 1940s and early 1950s and to a lesser extent later on, the
major arguments were over the base’s size and how it affected the development of Social
Security. A larger base meant that more earnings would be credited to a person’s Social Security
record and would lead to higher benefits (since benefits are based on a worker’s earnings).
Proponents argued that the base needed to be raised to reflect wage or price growth so that the
benefits of moderate and well-to-do recipients would not erode over time (thereby preserving
their support for the system). Critics argued that this would increase benefits for people who
could save on their own while making saving by private means more difficult. In 1972, as a
means of financing COLAs for Social Security recipients, procedures were enacted that increased
the base automatically to reflect the growth in average wages. In 1977, the base was raised
beyond what resulted from the automatic increase provision (by $7,500 over three years) as a
means of raising revenue to help shore up the program’s ailing financial condition. These ad hoc
adjustments were intended to achieve a base under which 90% of all covered payroll would be
subject to tax.
Medicare was enacted in 1965 with the hospital insurance (HI) portion of the program financed
with payroll taxes. The HI tax was first levied in 1966 at a rate of 0.35% (on employee and
employer, each) and the maximum taxable amount was set at the same level as Social Security’s.3
The HI rate was subsequently raised periodically (reaching its current level of 1.45% in 1986) to
meet the financing needs of the program. However, its base continued to be the same as Social
Security’s through 1990. Then, to reduce federal budget deficits, the Omnibus Budget
Reconciliation Act of 1990 (P.L. 101-518) raised the HI base to $125,000. The HI base then rose
automatically to $135,000 over the next two years. In 1993, as part of his plan to reduce budget
deficits, President Clinton proposed that the HI base be eliminated entirely. As part of the
Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66) the HI base was removed, raising an
estimated $29 billion in revenues over the FY1994-FY1998 period. As there is no maximum
taxable earnings amount in Medicare, Medicare financing will not be discussed further in this
report.
The Taxable Earnings Base
The Taxable Earnings Base Today
In 2010, an estimated 162 million workers will pay Federal Insurance Contributions Act (FICA)
taxes and Self-Employment Contributions Act (SECA) taxes on their wages and net self-
employment income.4 Both employers and employees contribute earnings at the FICA rate and
SECA taxes are paid by the self-employed. Both taxes have three components: Old Age and
Survivors Insurance (OASI), Disability Insurance (DI), and the HI part of Medicare. The OASDI
tax is levied on earnings up to $106,800 in 2010. The HI tax is levied on all earnings.
3 The same maximum taxable amount was set for the self-employed when they were covered in 1951 and for the
Disability Insurance (DI) portion of the tax when it was first levied in 1957.
4 Social Security Administration, Office of the Chief Actuary, Social Security Program Fact Sheet, available at
http://www.ssa.gov/OACT/FACTS/index.html.Some workers (approximately 4%) are exempt from Social Security
payroll taxes and are therefore not “covered” by Social Security. From this point forward, all references to earnings are
“covered” earnings and workers are “covered” workers. For a listing of workers who are exempt from Social Security
taxes, see CRS Report 94-28, Social Security and Medicare Taxes and Premiums: Fact Sheet, by Dawn Nuschler.
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The taxable earnings base limits the amount of wages or self-employment income used to
calculate contributions to Social Security. Unlike income taxes, workers who have earnings over
the limit, whether they earn $110,000 or $1 million, pay the same dollar amount in Social
Security payroll taxes. Under the 2010 limit of $106,800, the maximum amount a wage and
salary worker contributes to Social Security is $6,622 (his or her employer contribute an equal
amount) whereas a self-employed individual contributes a maximum of $13,243.5
The taxable earnings base also limits the annual amount of earnings that are used in benefit
calculations and thus sets a ceiling on the amount Social Security pays in benefits. For example,
the maximum amount of earnings in 2010 used to calculate a worker’s benefit is $106,800,
regardless of whether the worker earned above that amount. If an individual earned at or above
the earnings base for his or her entire career6 and retired in 2010 at the full retirement age, his or
her annual benefit would be $28,164 ($2,347 per month), the maximum benefit payable under
current law.7 However, very few Americans receive the maximum benefit as it is extremely rare
to have had such consistently high earnings over a lifetime.
Table 1. 2010 Social Security and Medicare Tax Rates and Maximum Taxable
Earnings, Maximum Taxes Paid, and Maximum Retirement Benefits
FICA and SECA Tax Rates:
FICA
SECAa
Old-Age and Survivors Insurance
5.30%
10.60%
+Disability Insurance
0.90%
1.80%
=Subtotal Social Security (OASDI) tax rate
6.20%
12.40%
+ Hospital Insurance tax rate
1.45%
2.90%
Total FICA and SECA Rate
7.65%
15.30%
Combined Employee and Employer FICA Tax Rates:
Employee
7.65%
+Employer
7.65%
Combined FICA Rate
15.30%
Maximum Taxable Earnings:
Social Security
$106,800
Hospital Insurance
no maximum
Maximum FICA/SECA Taxes:
OASDI HI
Employee/Employer (each):
$6,622
No limit
Self-Employed: $13,243
No
limit
5 $106,800 x 6.2% = $6,622 and $106,800 x 12.4% = $13,243.
6 The Social Security benefit formula calculates benefits based on a worker’s highest 35 years of earnings.
7 Social Security Administration, 2009 Fact Sheet, available at http://www.ssa.gov/pressoffice/factsheets/
colafacts2009.pdf.
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Social Security Benefit for 2010 Retiree With Earnings
at or Above the Maximum for Entire Career
Monthly Annual
Retired at age 62:
$1,824
$21,888
Retired at ful retirement age (66):
$2,346
$28,152
Source: SSA http://www.ssa.gov/pressoffice/factsheets/colafacts2010.pdf.
a. Certain adjustments and income tax deductions apply.
The Taxable Earnings Base Over Time
The portion of Social Security covered earnings that are subject to the payroll tax has fluctuated
over time (Figure 1). When the program began in 1937, taxable earnings represented 92% of
covered earnings (Table A-1). By 1965, this ratio had dropped to its low of 71%. Prior to 1972,
the taxable earnings base was updated periodically by Congress, which contributed to its dramatic
fluctuations in the 1950s and 1960s. Since 1972, the base has been indexed to the increase in
wages in the economy, which has reduced the volatility somewhat. As described earlier, to raise
revenue, Congress raised the taxable earnings base in the 1977 amendments to the Social Security
Act to a level that would cover 90% of aggregate earnings by 1982.
Since the 1980s, the share of covered workers below the taxable earnings base has remained
relatively stable at roughly 94%. However, the share of covered earnings that are taxed has fallen
from 90% of all earnings in 1982 to 83% in 2007. The large declines in the late 1990s were
mainly because salaries for top earners grew faster than the pay of workers below the cap.8
8 At least some of this decline and subsequent increase in the ratio after 2000 is believed to be due to stock option
activity surrounding the stock market bubble in 2000 and is not likely to recur. (SSA, 2005 OASDI Trustees Report.)
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Figure 1. Share of Earnings and Workers Below the Taxable Earnings Base,
1950-2007
100%
90%
80%
70%
60%
50%
40%
% of workers w/ covered
earnings below Social Security
30%
base
% of covered earnings below
Social Security base
20%
10%
0%
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Source: Figure prepared by the Congressional Research Service (CRS), based on data from the Social Security
Administration, Annual Supplement, 2009.
The Taxable Earnings Base by State
In 2007, 6% of workers had earnings above the taxable base of $97,500.9 However, focusing on
the nationwide average hides the diversity among the states and the District of Columbia. The
share of the population above the base ranges from a high in New Jersey where nearly 12% of
covered workers earn above the base, to a low in South Dakota, where 2% of workers earn above
this amount (Table A-2). The states with the lowest share of workers over the base are South
Dakota, Mississippi, North Dakota, Arkansas, and West Virginia. Those with the highest share of
workers over the base are the New Jersey, District of Columbia, Connecticut, Massachusetts, and
Maryland.
The Taxable Earnings Base by Employment Status and Gender
According to statistics from the Social Security Administration, a small share of workers earn
above the taxable earnings base each year. In 2007, 6% of workers (10.0 million individuals)
earned more than the taxable earnings base (Table A-3).10 Most of the individuals earning above
9 Note that the years denoted for Table A-1, Table A-2, and Table A-3 differ slightly due to differences in availability
of data.
10 Social Security Administration, Annual Statistical Supplement 2009, http://www.ssa.gov/policy/docs/statcomps/
supplement/2009/4b.html#table4.b1. ( Hereafter referred to as SSA Statistical Supplement, 2009.)
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the base were men (7.4 million individuals or roughly 80% of the total). In 2007, 9% of all male
workers and 3% of all female workers had earnings above the maximum. Most individuals
earning above the base were wage and salary workers (roughly 93% of the total). Only 6.4% of
individuals who earned above the base were self-employed.
The Future of the Taxable Earnings Base
The taxable wage base is increased annually by the average growth in wages, so the share of the
population below the cap is expected to remain relatively stable over time. However, because of
increasing earnings inequality, the share of payroll that is taxed is expected to decline even
further. Under the intermediate assumptions of the 2007 Trustees Report, the percentage of
covered earnings that is taxable is projected to decline to about 83% for 2015. However, the
Trustees Report assumes the levels will remain stable thereafter.
Projections of the Share of the Population Earning Above the
Taxable Wage Base Over Their Lifetime
Workers’ earnings rise and fall during their careers, so any analysis of the population that earns
above the taxable wage base in a given year is limited in that it may miss individuals who were
above the base in previous years or will have earnings above the base in the future. To address
this issue, CRS used the Dynasim microsimulation model to estimate the share of individuals in
the future who will ever have earned above the current-law taxable wage base over the course of
their lifetimes.11
11 The Urban Institute’s Dynamic Simulation of Income Model (Dynasim) is a computer model that uses survey data to
project earnings, demographic changes, retirement income, and Social Security benefits through the year 2050. For
more information about the model, how it works, and how to interpret results, see CRS Report RL33840, Options to
Address Social Security Solvency and Their Impact on Beneficiaries: Results from the Dynasim Microsimulation
Model, by Dawn Nuschler et al.
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Figure 2. Share of the Population with Earnings Above the
Taxable Wage Base Over Their Lifetime
Source: CRS calculations using the Urban Institute’s Dynasim microsimulation model.
In 2007, 6% of workers earned more than the taxable earnings base.12 The Dynasim model
projects this share will remain relatively constant over time. Although a small share of workers
are projected to earn above the taxable earnings base in a given year, the model estimates that
roughly one in five individuals would earn above the maximum at some point in their lifetimes
(Figure 2). The model projects that 12% of workers would earn above the earnings base for
between one and five years over the course of their working lives. Few individuals sustain the
high earnings for long periods in their careers. The model estimates that only 5% of workers
would earn above the taxable wage base for more than five years.13
Few individuals have earnings higher than a level of taxable earnings that would cover 90% of
aggregate earnings (the level Congress attempted to achieve when it last addressed Social
Security’s finances). The Dynasim model projects that roughly 1% of workers have earnings
above a 90% limit each year. In other words, due to high levels of earnings inequality, roughly
1% of the population earn 10% of all the earnings.14 Looking over the course of an individual’s
lifetime, the model projects that less than 4% of the population would ever earn above the 90%
base and nearly all of those who do would earn above the base for less than five years (Figure 2).
12 SSA Statistical Supplement, 2009.
13 The share of the population affected by this policy is influenced by the way the Dynasim model projects an
individual’s earnings. There is a significant amount of year-to-year variation in the projection of each individual’s
earnings.
14 The Dynasim model projections are consistent with current data on wage inequality. In 2004, the top 1% of earners
were paid 11% of aggregate earnings (source: CRS analysis of the March 2005 Current Population Survey).
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Impact of Raising or Eliminating the Taxable
Earnings Base
Raising or removing the taxable earnings base could reduce or eliminate the long-term Social
Security deficit.15 The additional tax revenues would be substantial. However, the full impact of
the policy change would depend on whether the wages above the maximum would also be
counted toward benefits. Raising or eliminating the taxable earnings base while maintaining the
current benefit structure, where benefits are calculated on the full contribution base, would lead to
higher monthly Social Security checks for individuals who earned more than the taxable wage
base during their careers. These higher benefit payments would lead to greater program outlays,
although these expenditures would be more than offset by greater tax revenues. While the
solvency impact would be improved to a greater degree if the cap on taxes was eliminated and the
cap on benefits was retained, the traditional link between contributions and benefits would be
broken.
Rather than eliminate the taxable wage base, policymakers could set it to cover a constant share
of aggregate earnings. As described previously, the portion of Social Security covered earnings
subject to the payroll tax has fluctuated since its inception. Rising inequality—primarily increases
in the earnings of the highest paid individuals—has led to a decline in the share of U.S. earnings
that is taxed. The proportion of earnings that is taxed is projected to continue to fall. Maintaining
a consistent tax base would increase revenue and help to improve the system’s solvency. Some
have proposed raising the taxable earnings base to consistently tax 90% of aggregate U.S.
earnings—restoring it to roughly the level in 1982 when Congress last addressed Social
Security’s finances. The Social Security Administration and the Joint Committee on Tax have also
used this benchmark to analyze the impact of raising the base on the Social Security trust funds
and the budget.
The following sections examine the impact of raising or eliminating the taxable wage base on
individuals, the Social Security trust funds, on federal revenue, and on workers’ and employers’
behavior.
Impact on Individuals’ Lifetime Payroll Taxes and Social Security
Benefits if the Taxable Wage Base Were Eliminated
To estimate how much individuals’ taxes and benefits would rise if the wage base were
eliminated, CRS has used the Dynasim microsimulation model to look at Social Security
beneficiaries in the year 2035. The estimates assume the taxable wage base would be completely
eliminated starting in 2013 for calculating both the payroll taxes and future Social Security
benefits. The following sections detail the impact of eliminating the base on beneficiaries based
on their income and gender.16
15 There is precedent for this proposal. When the hospital insurance (HI) tax was levied in 1966 the maximum taxable
amount was set the same as for Social Security. As part of the Omnibus Budget Reconciliation Act of 1993 (P.L. 103-
66), the HI base was removed.
16 CRS estimates of the impact of this and other reform proposals, including raising the base to cover 90% of taxable
earnings, are also available based on beneficiaries’ socioeconomic status (including ethnicity, education, and marital
(continued...)
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Aggregate Changes
If the base were removed, the majority of beneficiaries would pay no additional taxes compared
with current law, as fewer than 8% of workers are projected to earn above the taxable wage base
each year. Examining the impact on individuals receiving Social Security benefits in 2035,
roughly one in five beneficiaries (21%) would have paid any additional taxes over their lifetimes
compared with current law (Figure 3). For most of these affected individuals, the increase would
be moderate. Roughly 16% of all beneficiaries would see their lifetime tax payments increase by
less than 10%. However, 3% of all beneficiaries would have their tax payments increase by 10%
to 19%, and 2% would have tax increases of 20% or more.
To maintain the traditional link between contribution and benefits, policymakers could choose to
calculate benefits based on a worker’s total earnings, including those above the taxable wage
base. Under this option, some beneficiaries would receive higher Social Security benefits. CRS
estimates that 23% of beneficiaries in 2035 would have higher benefits than under current law.
This share of beneficiaries who receive higher benefits is greater than the share of individuals
who pay higher taxes because some low earners receive benefits based on their spouses’ higher
earnings. Most of the affected beneficiaries (20%) would see their benefits increase by less than
10% relative to current law. Only 3% of beneficiaries would see their benefits increase by 10% or
more.
Although 21% of beneficiaries in 2035 would pay some additional payroll taxes over the course
of their lifetimes if the base were removed, the average change in taxes and benefits would be
small. Looking only at individuals who would pay higher taxes over the course of their lifetimes,
at the median, total lifetime tax payments would rise by 3% and benefits would increase by 2%
relative to current law.
(...continued)
status). (CRS Report RL33841, Options to Address Social Security Solvency and Their Impact on Beneficiaries:
Results from the Dynasim Microsimulation Model—Detailed Distributional Tables, by Dawn Nuschler et al.)
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Figure 3. Share of Beneficiaries in 2035 with Tax and Benefit Increases Compared
with Current Law If the Taxable Earnings Base Is Eliminated, by Level of Increase
Source: CRS calculations using the Urban Institute’s Dynasim microsimulation model.
Note: Lifetime taxes include both individual and employer OASDI contributions or self-employment
contributions throughout the individual’s entire career.
Changes by Income Group
The impact of eliminating the taxable wage base on payroll taxes paid varies significantly by
income group.17 The overwhelming majority (98%) of beneficiaries in 2035 in the lowest income
quintile would pay no additional taxes over their lifetime (Figure 4). Few in this group would
receive benefit increases if the cap were removed. Under this proposal only 3% of beneficiaries in
the lowest income category would receive benefit increases, and the increase would be for less
than 10%.
The story is different for higher-income beneficiaries. Roughly one-half of those in the highest
income quintile are estimated to have had tax increases over their lifetimes relative to current law.
Whereas 35% of beneficiaries in the top quintile would see their lifetime taxes rise by less than
10%, some (7%) would see their taxes rise between 10% and 19% and some (6%) would see their
taxes rise 20% or more. Beneficiaries in the highest income groups would also see the largest
change in their benefits if the taxable wage base were removed. One-half of beneficiaries in the
top fifth of the income distribution in 2035 would have an increase in benefits relative to current
law. In this highest quintile, 42% would have benefit increases of less than 10%, some (5%)
17 Note that the income groups are defined in 2035 using family income after an individual claims disability, retirement,
survivor, or spousal benefits. Thus, some low income beneficiaries are affected by the policy if they earned above the
taxable wage base at any point in their careers.
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would have benefit increases of 10%-19% and a few (3%) would have benefit increases of 20%
or more.
Figure 4. Share of Beneficiaries in 2035 with Higher Payroll Taxes or Benefits
Compared with Current Law If the Taxable Earnings Base Is Eliminated,
by Highest and Lowest Quintile
Source: CRS calculations using the Urban Institute’s Dynasim microsimulation model.
Changes by Gender
Because the majority of workers who earn above the taxable wage base in a given year are men
(Table A-3 and described above), men would be more likely to pay higher payroll taxes than
women if the taxable wage base were eliminated. Among men who receive benefits in 2035, more
than one in four would pay higher payroll taxes over the course of their lifetimes (Figure 5).
Twenty percent of male beneficiaries would have a tax increase of less than 10%, but 7% would
see their lifetime tax contributions increase by more than 10%. If the taxable earnings base was
removed, one in four men would receive higher benefits. The majority of the men affected (22%
of all male beneficiaries) would see a small increase in benefits, but 3% of all men would have
benefits increase by more than 10%. In contrast, only 15% of women who receive benefits in
2035 would have paid any additional payroll taxes over the course of their lives. Of these women,
only 2% would have an increase of more than 10%. Because many women receive benefits based
on their spouses’ earnings, the share of women who would see a rise in benefits is higher than the
share that would pay additional taxes. Although the benefits of one in five female beneficiaries in
2035 would rise, for most it would be a small increase of less than 10%.
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Social Security: Raising or Eliminating the Taxable Earnings Base
Figure 5. Share of Male and Female Beneficiaries in 2035 with Higher Payroll Taxes
or Benefits Compared with Current Law If the Taxable Earnings Base Is Eliminated,
by Gender
100%
3%
1%
1%
1%
4%
2%
1%
1%
13%
90%
22%
18%
20%
80%
70%
60%
50%
85%
40%
80%
73%
75%
30%
20%
10%
0%
Taxes
Benefits
Taxes
Benefits
Men
Women
no change
up to 10%
10%-19%
20% or more
Source: CRS calculations using the Urban Institute’s Dynasim microsimulation model.
Impact on the Social Security Trust Funds
Under the assumptions of the 2009 Trustees Report, the actuaries at the Social Security
Administration calculate that it would take an immediate increase in combined payroll taxes of
2.0% of taxable payroll (from 12.40% to 14.40%) to achieve solvency over the next 75 years.18
Without this increase or other changes to the system, the 2009 Trustees Report projected that the
OASDI Trust Funds would be exhausted in 2041. The actuaries at SSA have estimated the impact
on the Trust Funds of three options to change the benefit and contribution base which are
described below.
18 The projections in this section were done using the assumptions of the 2005 Trustees Report to match the estimates
in Table 4, which are the most recent estimates available for these options.
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Social Security: Raising or Eliminating the Taxable Earnings Base
Table 2. Impact on the Social Security Trust Funds of Raising or Eliminating the
Social Security Taxable Earnings Base
Year the Trust
75-Year
Percentage of
Funds Are
Actuarial Balance
75-Year
Exhausted
(as % of taxable
payroll)
Shortfall Met
No change to current law
2041
-1.92
Option 1: Make 90% of the earnings subject
2044 -1.09 43%
to the payrol tax and credit them for
benefit purposes (phased in 2006-2015)
Option 2: Make al earnings subject to the
naa -0.10 95%
payroll tax and credit them for benefit
purposes (beginning in 2006)
Option 3: Make al earnings subject to the
naa 0.28 115%
payrol tax but retain the cap for benefit
calculations (beginning in 2006)
Sources: Social Security Administration, Memorandum, dated August 10, 2005.
Notes: Al calculations use the intermediate assumptions of the 2005 Trustees Report.
a. Solvent beyond 75-year estimate.
Option 1: Cover 90% of Earnings and Pay Higher Benefits
One proposal would slowly raise the taxable wage base for both employers and employees to
cover 90% of all earnings and credit these taxes to allow individuals to receive correspondingly
higher benefits. In 2006, it was estimated that a cap of $171,600 would roughly cover 90% of
wages.19 Under this option, benefits at retirement for high earners would also rise. These changes
would have a net positive impact on the Social Security Trust Funds (Table 2). Raising the wage
base to 90% would eliminate 43% of the long-range financial shortfall—extending the Trust
Funds’ exhaustion date to 2044. To achieve solvency for the full 75-year projection period under
this option, the total payroll tax rate would have to be raised by an additional 1.09 percentage
points (from 12.40% to 13.49%) or other policy changes would have to be made to cover the
shortfall.20
Option 2: Cover All Earnings and Pay Higher Benefits
If the earnings base was completely eliminated for both employers and employees so that all
earnings were taxed, 95% of the projected financial shortfall in the Social Security program
would be eliminated. To achieve solvency for the full 75-year projection period under this option,
the total payroll tax rate would have to be raised by an additional 0.1 percentage points (from
12.4% to 12.5%) or other policy changes would have to be made to cover the shortfall.
19 Social Security Administration, Estimated Financial Effects of “A Nonpartisan Approach to Reforming Social
Security - A Proposal Developed by Jeffrey Liebman, Maya MacGuineas and Andrew Samwick”—INFORMATION,
Memorandum, dated November 17, 2005, http://www.ssa.gov/OACT/solvency/Liebman_20051117.pdf.
20 Social Security Administration, Estimated OASDI Long-Range Financial Effects of Several Provisions Requested by
the Social Security Advisory Board, Memorandum, dated August 10, 2005, available at http://www.ssa.gov/OACT/
solvency/provisions/index.html.
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Social Security: Raising or Eliminating the Taxable Earnings Base
Under this scenario high earners would pay higher taxes but also receive higher benefits.
However, the net benefit to the Trust Funds is positive as $5 in additional revenue would provide
only $1 in additional benefits (on average over their 75-year valuation period). Annual Social
Security benefit payments would be much higher than today’s maximum of $25,440. A worker
who paid taxes on earnings of $400,000 each year would get a benefit of approximately $6,000 a
month or $72,000 a year—a replacement rate of 18%—while someone with lifetime earnings of
$1 million a year would get a monthly Social Security benefit of approximately $13,500 a month
or $162,000 a year—a replacement rate of 16.2%.21
Option 3: Cover All Earnings and Pay No Additional Benefits
Finally, if the base was completely eliminated for both employers and employees so that all
earnings were taxed, but those earnings did not count toward benefits, solvency would be restored
to Social Security. The increased revenue would eliminate 115% of the projected shortfall and the
program would have a projected surplus equal to .28% of taxable payroll. Under this scenario, the
payroll tax rate could be immediately lowered from 12.40% to 12.12% and the system would
remain solvent for the next 75 years. However, the traditional link between the level of wages that
is taxed and the level of wages that counts toward benefits would be broken.
Impact on Federal Revenue
Raising the taxable earnings base would lead to an increase in total federal revenues. The Joint
Committee on Taxation has estimated that raising the wage base to 90% of earnings, to $186,000
in 2008, would generate $221 billion in additional revenue over the five-year budget window of
2008-2012 (Table 3).22 Over 10 years, the policy would generate more than $524 billion. Raising
the payroll tax base to cover an additional 1%-2% of income (above the 90% level) would
generate $32 billion-$64 billion more over five years and $80 billion-$158 billion more over 10
years.
Table 3. Revenue Impact of Raising the Social Security Taxable Earnings Base
Taxable Wage Base
Total Change in Revenues
(dollars)
(billions of dollars)
Year
2008
2008-2012
2008-2017
Tax 92% of earnings
250,000
+284.7
+682.7
Tax 91% of earnings
214,000
+253.5
+604.3
Tax 90% of earnings
186,000
+221.1
+524.4
Source: Joint Committee on Taxation, 2007.
21 Calculations are for 2005 from Reno and Lavery, Options to Balance Social Security Funds, February 2005. Benefits
this high would be extremely rare as few individuals earn above the taxable wage base for their entire career.
22 Congressional Budget Office, Budget Options, Revenue Option 39: Increase the Upper Limit for Earnings Subject to
the Social Security Payroll Tax, February 2007, at http://www.cbo.gov.
Note that the estimates by the actuaries at the Social Security Administration (SSA) and the Joint Committee on
Taxation (JCT) differ slightly due to different assumptions. SSA assumes the maximum wage base will be adjusted
each year to keep taxable wages at a constant percent of wages whereas the JCT assumes it will be a one-time increase
with adjustments only for inflation thereafter. JCT estimates also account for the effects on all sources of revenue,
including changes to income taxes and Medicare taxes.
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Social Security: Raising or Eliminating the Taxable Earnings Base
Impact on Workers’ and Employers’ Behavior
The reaction of high-earning workers and their employers to raising or removing the taxable
earnings base is unknown and was not taken into consideration in the above estimates of the
distributional, trust fund, and revenue impacts.
Workers who earn more than the cap would have a reduced incentive to work as their after-tax
earnings will fall.23 However, whether these individuals would significantly reduce the amount
they work is a matter of debate.24 Each worker would face a decision between the reduced
earnings and the additional leisure time, based on the worker’s individual preferences. Workers
who have earnings above the current base would also have an incentive to change the form of
their compensation (e.g., from earnings to fringe benefits) to avoid paying additional payroll
taxes.25
The impact of raising the base on employers of high-income earners is also unknown. Employers
contribute 6.2% of workers’ wages up to the taxable wage base toward Social Security. If
employers are unable to pass along the higher tax costs to workers in the form of reduced
earnings, their overall labor costs will increase. Employers may react by raising prices to
consumers, reducing other non-wage forms of compensation such as health benefits or pensions,
or reducing the number of workers.
Legislation in the 111th Congress
One bill has been introduced in the 111th Congress to change the taxable wage base. H.R. 1863,
introduced by Representative Wexler, would require workers and employers to contribute 3% of
earnings above the taxable wage base, and self-employed individuals to contribute 6%. Earnings
above the taxable wage base would not be credited for benefit computation purposes.
Arguments For and Against Raising or Eliminating
the Base
Some of the general arguments for and against changing the Social Security taxable earnings base
follow.
Arguments For
The major critique about the Social Security base is that it creates a regressive tax structure.
Workers earning less than the base have a greater proportion of earnings taxed than workers
whose earnings exceed it. In 2008, someone with annual earnings of $30,000 pays $1,860 in
Social Security taxes, or 6.2% of his or her earnings (ignoring the employer share of the tax).
23 The response by high earners may depend on whether the wage base is raised slightly or completely eliminated.
24 For a more detailed discussion of this debate, see CRS Report RL33943, Increasing the Social Security Payroll Tax
Base: Options and Effects on Tax Burdens, by Thomas L. Hungerford.
25 See Martin Sullivan, “Budget Magic and the Social Security Tax Cap,” Tax Notes, March 14, 2005.
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Social Security: Raising or Eliminating the Taxable Earnings Base
However, because the tax is levied on only the first $106,800 in earnings, someone earning
$200,000 a year pays $6,622 or 3% of his or her earnings.
Supporters of changing the wage base point out that only 6% of workers have earnings above the
base in any given year. However, because of rising earnings inequality, the amount of their
earnings that escapes taxation has risen from 12% to 15% since 1991, and is projected to continue
to rise through 2014. They therefore contend that the current tax structure favors a small group of
the more well-off workers in society.
They also point out that the overall employee tax rate rose from 6.13% in 1980 to 7.65% in 1990
(counting the Medicare portion)—or by 25%—and assert that this increase is one of the main
reasons for a disproportionate rise in the aggregate federal tax burden on lower- and middle-
income people over that decade.26 They further maintain that for most workers, Social Security
and Medicare taxes (counting the employer share, which they view as foregone wages) are now
greater than their income taxes.
Supporters argue that subjecting a larger percentage of earnings to the payroll tax would also
adjust for the higher life expectancies of high earners.27 On average, people with more education
and higher earnings live longer than those with lower earnings and less education and this
difference has been growing over time. The impact on the Social Security program is that these
individuals receive benefits for more years over their lifetimes making the system less
progressive.28 They claim that raising the taxable wage base would make a reasonable adjustment
for the faster-than-average life expectancy gains among high earners.
Thus, supporters of changing the base argue that raising or eliminating the base not only would be
more fair, but also that Social Security’s projected long-range financing problems could be
substantially alleviated or, alternatively, that the payroll tax rate could be reduced without causing
a loss of revenue to the system. It is estimated that almost $100 billion in revenue to the Social
Security program would be generated annually by taxing all earnings, and if such revenues were
not used to lower the tax rate, they would reduce the government’s outstanding debt and eliminate
about 95% of Social Security’s long-range deficit.
Among supporters of changing the current base, there is disagreement regarding how high the
base should be raised or if other changes should be made to tax income above the base. Several
proposals would not eliminate the base entirely but raise it to cover 90% of taxable wages,
restoring the level that was set in the 1977 amendments to the Social Security Act. Others have
claimed that increasing the base to 90% would be a large tax increase for those who earn between
the current base and the new level, but would have little impact on the share of taxes paid by
individuals with the highest earnings.29 Other options would be to remove the cap completely
26 See CRS Report RL32693, Distribution of the Tax Burden Across Individuals: An Overview, by Jane G. Gravelle and
Maxim Shvedov.
27 See Peter A. Diamond and Peter R. Orzag, Saving Social Security: A Balanced Approach, Brookings Institution,
2004.
28 The Social Security benefit formula is thought to be progressive in that the monthly benefits of low-wage earners
replace a greater proportion of their earnings than do the monthly benefits of high-wage earners.
29 For a study of how the effective tax rates paid by different income groups would change under such a proposal, see
CRS Report RL33943, Increasing the Social Security Payroll Tax Base: Options and Effects on Tax Burdens, by
Thomas L. Hungerford.
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Social Security: Raising or Eliminating the Taxable Earnings Base
over the base, but lower the tax rate on those higher earnings30 or tax employers and employees at
different rates above the current base. Others have called for broadening the sources of income
that are taxed beyond earnings.31 Proponents of these ideas argue that they would close a
significant portion of Social Security’s long-range deficit without subjecting upper-middle
income individuals to sizeable increases in their marginal tax rates.
Arguments Against
Those who support keeping the base as it is point out that while the structure of the payroll tax
may be regressive, it is offset by the progressive calculation of benefits.
They further maintain that its critics fail to take into account the effect of other tax and transfer
programs targeted to low-earners. They point out that mitigating the Social Security tax bite was
part of the motivation for creating the earned income tax credit (EITC), which provides an
income tax credit on earnings up to $41,646 in 2008 for married workers with two or more
children (up to $15,880 for married workers without children). They also point out that low-
income families receive a greater share of government transfer payments that are not subject to
Social Security payroll taxes. They argue that the combination of these factors mitigates the flat-
rate nature of the tax at lower earnings levels, and that for most other workers the tax is
proportional (because it is flat-rate). It is only at the upper end of the income spectrum that it
takes on a regressive appearance.
Critics also argue that raising the cap will serve as a disincentive to work and could serve as a
drain on the economy.32 Because additional work effort would generate less after-tax income,
supporters claim that workers faced with this higher marginal rate would either reduce their hours
or avoid the tax by changing the form of their compensation.
From another perspective, some—who might otherwise espouse progressive taxation—support
raising the base but not eliminating it. Having a cap makes Social Security seem less like general
purpose taxation. They argue that the system needs support from people of all earnings levels, and
that the larger benefits that high earners would receive would represent a poor return for the
higher taxes they would pay. Moreover, regardless of the money’s worth issue, some question the
wisdom of paying large benefits to well-to-do people. They argue that the purpose of the program
is to provide a floor of protection for retirement, not large benefits for those who can save on their
own. They contend that eliminating the base would raise public cynicism about a publicly
financed system that pays enormous benefits to people who already are well off.
30 Robert C. Posen, “PIN Money,” Wall Street Journal, January 9, 2007.
31 Citizens for Tax Justice, An Analysis of Eliminating the Cap on Earnings Subject to the Social Security Tax and
Related Issues, November 30, 2006, at http://www.ctj.org/pdf/socialsecuritytaxearningscapnov2006.pdf.
32 See D. Mark Wilson, Removing the Social Security’s Tax Cap on Wages Would Do More Harm Than Good, The
Heritage Foundation, October 18, 2001.
Congressional Research Service
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Social Security: Raising or Eliminating the Taxable Earnings Base
Appendix. Taxable Earnings Bases and Worker
Income: Detailed Tables
Table A-1. Social Security and Medicare Tax Rates and Taxable Earnings Bases,
1937-2010
Tax Rates
Percentage of
Percentage
Self-employed
Maximum
workers with
of covered
(Social Security taxable earnings
earnings
earnings
Social
and HI
for Social
below Social
below Social
Year
Securitya
HIa
combined)
Security and HI
Security base Security base
1937 1.000
—
—
$3,000
96.9
92.0
1940 1.000
—
—
3,000
96.6
92.4
1945 1.000
—
—
3,000
86.3
87.9
1950 1.500
—
—
3,000
71.1
79.7
1951 1.500
—
2.25
3,600
75.5
81.1
1952 1.500
—
2.25
3,600
72.1
80.5
1953 1.500
—
2.25
3,600
68.8
78.5
1954 2.000
—
3.0
3,600
68.4
77.7
1955 2.000
—
3.0
4,200
74.4
80.3
1956 2.000
—
3.0
4,200
71.6
78.8
1957 2.250
—
3.375
4,200
70.1
77.5
1958 2.250
—
3.375
4,200
69.4
76.4
1959 2.500
—
3.75
4,800
73.3
79.3
1960 3.000
—
4.5
4,800
72.0
78.1
1961 3.000
—
4.5
4,800
70.8
77.4
1962 3.125
—
4.7
4,800
68.8
75.8
1963 3.625
—
5.4
4,800
67.5
74.6
1964 3.625
—
5.4
4,800
65.5
72.8
1965 3.625
—
5.4
4,800
63.9
71.3
1966 3.850 0.35
6.15
6,600
75.8
80.0
1967 3.900
0.5
6.4
6,600
73.6
78.1
1968 3.800
0.6
6.4
7,800
78.6
81.7
1969 4.200
0.6
6.9
7,800
75.5
80.1
1970 4.200
0.6
6.9
7,800
74.0
78.2
1971 4.600
0.6
7.5
7,800
71.7
76.3
1972 4.600
0.6
7.5
9,000
75.0
78.3
1973 4.850
1.0
8.0
10,800
79.7
81.8
1974 4.950
0.9
7.9
13,200
84.9
85.3
Congressional Research Service
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Social Security: Raising or Eliminating the Taxable Earnings Base
Tax Rates
Percentage of
Percentage
Self-employed
Maximum
workers with
of covered
(Social Security taxable earnings
earnings
earnings
Social
and HI
for Social
below Social
below Social
Year
Securitya
HIa
combined)
Security and HI
Security base Security base
1975 4.950
0.9
7.9
14,100
84.9
84.4
1976 4.950
0.9
7.9
15,300
85.1
84.3
1977 4.950
0.9
7.9
16,500
85.2
85.0
1978 5.050
1.0
8.1
17,700
84.6
83.8
1979 5.080 1.05
8.1
22,900
90.0
87.3
1980 5.080 1.05
8.1
25,900
91.2
88.9
1981 5.350
1.3
9.3
29,700
92.4
89.2
1982 5.400
1.3
9.35
32,400
92.9
90.0
1983 5.400
1.3
9.35
35,700
93.7
90.0
1984 5.700
1.3
14.0
37,800
93.6
89.3
1985 5.700 1.35
14.1
39,600
93.5
88.9
1986 5.700 1.45
14.3
42,000
93.8
88.6
1987 5.700 1.45
14.3
43,800
93.9
87.6
1988 6.060 1.45
15.02
45,000
93.5
85.8
1989 6.060 1.45
15.02
48,000
93.8
86.8
1990 6.200 1.45
15.3
51,300
94.3
87.2
1991 6.200 1.45
15.3
53,400
94.4 87.8
(HI-125,000)
1992 6.200 1.45
15.3
55,500
94.3 86.8
(HI-130,200)
1993 6.200 1.45
15.3
57,600
94.4 87.2
(HI-135,000)
1994 6.200 1.45
15.3
60,600a
94.6 87.1
(HI-no limit)
1995 6.200 1.45
15.3
61,200
94.2 85.8
(HI-no limit)
1996 6.200 1.45
15.3
62,700
93.9 85.7
(HI-no limit)
1997 6.200 1.45
15.3
65,400
93.8 85.1
(HI-no limit)
1998 6.200 1.45
15.3
68,400
93.7 84.5
(HI-no limit)
1999 6.200 1.45
15.3
72,600
93.9 83.9
(HI-no limit)
2000 6.200 1.45
15.3
76,200
93.8 83.2
(HI-no limit)
2001 6.200 1.45
15.3
80,400
94.0 84.7
(HI-no limit)
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Social Security: Raising or Eliminating the Taxable Earnings Base
Tax Rates
Percentage of
Percentage
Self-employed
Maximum
workers with
of covered
(Social Security taxable earnings
earnings
earnings
Social
and HI
for Social
below Social
below Social
Year
Securitya
HIa
combined)
Security and HI
Security base Security base
2002 6.200 1.45
15.3
84,900
94.6 86.1
(HI-no limit)
2003 6.200 1.45
15.3
87,000
94.5 85.9
(HI-no limit)
2004 6.200 1.45
15.3
87,900
94.1 84.8
(HI-no limit)
2005 6.200 1.45
15.3
90,000
94.0b 84.2b
(HI-no limit)
2006 6.200 1.45
15.3
94,200
94.0b 83.6b
(HI-no limit)
2007 6.200 1.45
15.3
97,500
93.9b 83.1b
(HI-no limit)
2008 6.200 1.45
15.3
102,000
Not yet known
84.1b
(HI-no limit)
2009 6.200 1.45
15.3
106,800
Not yet known
Not yet known
(HI-no limit)
2009 6.200 1.45
15.3
106,800
Not yet known
Not yet known
(HI-no limit)
Source: Social Security Bul etin, Annual Statistical Supplement, 2009 at http://www.ssa.gov/policy/docs/statcomps/
supplement/2009.
a. Same for employer except 1984—employees received 0.3% credit (not reflected above). Various credits
also applied to self-employed (not reflected above) for 1984-1989 period.
b. Estimates.
Congressional Research Service
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Social Security: Raising or Eliminating the Taxable Earnings Base
Table A-2. The Number and Percentage of Covered Workers with Social Security
Taxable Earnings over the Taxable Earnings Base of $97,500, by State, 2007
Number and Share of Covered Workers with
Social Security Taxable Earnings Above the
Total Number of
Taxable Earnings Base
State
Covered Workers
With Social Security
Number
Percentage
Taxable Earnings
of Workers
of Workers
U.S. Total
158,778,500
9,854,700
6.2
Alabama 2,347,200
92,100
3.9%
Alaska 383,100
22,100
5.8%
Arizona 3,021,600
163,300
5.4%
Arkansas 1,447,300
43,000
3.0%
California 16,831,500
1,513,000
9.0%
Colorado 2,483,000
177,200
7.1%
Connecticut 1,972,100 205,800 10.4%
District of Columbia
372,300
42,400
11.4%
Delaware 516,400
30,100
5.8%
Florida 9,241,100
438,800
4.8%
Georgia 4,693,600
260,400
5.6%
Hawai 725,700
30,900
4.3%
Idaho 785,000
30,000
3.8%
Illinois
6,523,900 463,800 7.1%
Indiana 3,647,500
143,800
3.9%
Iowa 1,723,800
59,700
3.5%
Kansas 1,542,000
70,600
4.6%
Kentucky 2,133,700
71,900
3.4%
Louisiana 2,095,600
95,000
4.5%
Maine 761,900
26,300
3.5%
Maryland 3,165,100
294,800
9.3%
Massachusetts 3,433,200 338,100 9.9%
Michigan 5,171,500
282,700
5.5%
Minnesota 3,090,700
185,800
6.0%
Mississippi 1,378,500 38,500
2.8%
Missouri 3,097,700
133,700
4.3%
Montana 552,800
17,800
3.2%
Nebraska 1,037,800
36,000
3.5%
Nevada 1,255,500
58,900
4.7%
New Hampshire
813,500
60,000
7.4%
New Jersey
4,719,700
547,000
11.6%
Congressional Research Service
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Social Security: Raising or Eliminating the Taxable Earnings Base
Number and Share of Covered Workers with
Social Security Taxable Earnings Above the
Total Number of
Taxable Earnings Base
State
Covered Workers
With Social Security
Number
Percentage
Taxable Earnings
of Workers
of Workers
New
Mexico 957,700 36,200 3.8%
New York
10,003,900
855,600
8.6%
North Carolina
4,727,900
224,200
4.7%
North Dakota
389,600
11,400
2.9%
Ohio 5,769,700
276,300
4.8%
Oklahoma 1,886,300 61,000
3.2%
Oregon 1,963,200
98,600
5.0%
Pennsylvania 6,722,200 389,600 5.8%
Rhode Island
606,300
35,500
1.6%
South Carolina
2,260,900
85,300
3.8%
South Dakota
481,200
10,300
2.1%
Tennessee 3,237,300 141,800
4.4%
Texas 11,255,800
740,700
6.6%
Utah 1,329,100
56,300
4.2%
Vermont 425,600
15,100
3.6%
Virginia 4,291,900
353,800
8.2%
Washington 3,440,500 248,300 7.2%
West Virginia
867,000
26,600
3.1%
Wisconsin 3,190,300
132,600
4.2%
Wyoming 336,000
13,900
4.1%
Source: Custom tabulation based on the Continuous Work History Sample Files. Data extracted as of January
2009. Table provided by SSA, Office of Policy, Office of Research, Evaluation and Statistics.
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Social Security: Raising or Eliminating the Taxable Earnings Base
Table A-3. Number and Percentage of Workers Above the Taxable Earnings Base of
$97,500 by Type of Earnings and Sex, 2007
Percent of
Numbera
Percentage of
(in thousands)
Group in Total
Group Above the
Taxable Maximum
All workers
10,210 100% 6%
Men
7,813
77%
9%
Women
2,399
23%
3%
All wage and salary workers
9,420 92% 6%
Men
7,168
70%
9%
Women
2,253
22%
3%
All self-employed
790 8%
5%
Men
645
6%
6%
Women
146
2%
2%
Source: Social Security Bul etin, Annual Statistical Supplement, 2009 at http://www.ssa.gov/policy/docs/statcomps/
supplement/2009. (CRS calculations based on 2007 estimates from tables, 4.B1,4.B4, 4.B7, and 4B.9).
a. Workers with earnings in both wage and salary employment and self-employment are counted in each type
of employment but only once in the total.
Author Contact Information
Janemarie Mulvey
Specialist in Aging and Income Security
jmulvey@crs.loc.gov, 7-6928
Acknowledgments
Debra B. Whitman was the original author of this report.
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