Social Security: Raising or Eliminating the
Taxable Earnings Base
Updated September 2, 2020
Congressional Research Service
https://crsreports.congress.gov
RL32896

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
2020, this maximum—formal y cal ed the contribution and benefit base, and commonly referred
to as the taxable earnings base or the taxable maximum—is $137,700. The taxable earnings base
serves as both a cap on contributions and on benefits. As a contribution base, it establishes the
maximum amount of a 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. Because the cap is indexed to the average growth in wages, the share of the
population below the cap has remained relatively stable at roughly 94%. However, due to
increasing earnings inequality, the percentage of aggregate covered earnings that is taxable has
decreased from 90% in 1982 to 84% in 2017.
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, the Social Security Administration’s Office
of the Chief Actuary (OCACT) estimates that phasing in an increase in the taxable maximum (for
both contributions and benefits bases) to cover 90% of covered earnings over the next decade
would eliminate roughly 20% of the long-range shortfal in Social Security. OCACT’s estimates
also show that if al earnings were subject to the payroll tax, but the current-law base was retained
for benefit calculations, the Social Security trust funds would remain solvent for over 40 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.
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Introduction
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.1 In 2020, an
estimated 180 mil ion workers paid into Social Security via Federal Insurance Contributions Act
(FICA) taxes or Self-Employment Contributions Act (SECA) taxes, or both, on their wages and
net self-employment income.2 Both employers and employees contribute taxes 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 Hospital Insurance (HI) part of
Medicare. The OASDI (combined OASI and DI) tax is levied on earnings up to $137,700 in 2020
(see Table 1). The HI tax is levied on al earnings. By law, the Commissioner of Social Security
is required to raise the base whenever an automatic benefit increase—a cost-of-living adjustment
(COLA)—is granted to Social Security recipients, assuming wages have risen (e.g., there was no
increase in the base from 2015 to 2016 due to no COLA increase for 2016).3
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 above
the limit, whether they earn $200,000 or $2 mil ion, pay the same dollar amount in Social
Security payroll taxes. Under the 2020 limit of $137,700, the maximum amount a wage and
salary worker directly contributes to Social Security is $8,537 (the worker’s employer contributes
an equal amount), whereas a self-employed individual contributes a maximum of $17,075.4
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. If a worker
earned at or above the earnings base for his or her entire career and retired in 2020 at the full

1 In the Social Security Act and the Social Security Administration’s Program Operations Manual System, the formal
term used is contribution and benefit base. It is also commonly referred to as the taxable m axim um (or tax m ax).
2 Social Security Administration (SSA), Office of the Chief Actuary, Social Security Program Fact Sheet for 2020,
available at https://www.ssa.gov/OACT /FACT S/fs2020_06.pdf. Some workers (approximately 7%) 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. Workers who are exempt from Social Security
payroll taxes are primarily (1) state and local government workers, (2) certain religious group -employed workers, or (3)
certain noncitizen workers.
3 T he reason for the two-year lag in reflecting increases in average wages in the taxable earnings base is that av erage
wages for the year immediately prior to the year of the increase are not known at the time of the announcement (e.g.,
the increase in the base from 2014 to 2015, announced in 2014, is based on the increase in average wages from 2012 to
2013; in contrast, the 2014 cost -of-living adjustment (COLA) for 2015 benefits is based on the change in prices from
2013Q3 to 2014Q3). When there is no COLA, the reference year used for the wage indexing is maintained, similar to
how the reference year for COLA computations is maintained after a year without a COLA. For example, because there
was no COLA in 2015 for 2016 benefits, instead of using 2015Q3 as the reference year for calculating the COLA from
2016 to 2017 (changes from 2015Q3 prices to 2016Q3 prices), the COLA used 2014Q3 as the reference year (the
reference year of the 2015 COLA for 2016 benefits). T hus, the reference year used for the 2017 taxable earnings base
was 2013, not 2014. T here was also no increase in the base from 2009 to 2010 and from 2010 to 20 11 due to no COLA
increase in 2010 and 2011, respectively. For more details on COLAs, see CRS Report 94-803, Social Security: Cost-of-
Living Adjustm ents.
4 Maximum Social Security contribution calculation: $137,700 x 6.2% = $8,537.40 and $137,700 x 12.4% =
$17,074.80.
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retirement age,5 his or her annual benefit would be $36,132 ($3,011 per month).6 However, very
few Americans receive the maximum benefit, as it is rare to have had such consistently high
earnings over a lifetime.
Table 1. 2020 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 Insuranceb
5.30%
10.60%
+ Disability Insuranceb
0.90%
1.80%
= Subtotal Social Security (OASDI) tax rate
6.20%
12.40%
+ Hospital Insurance tax ratec
1.45%
2.90%
Total FICA and SECA Rates
7.65%
15.30%
+ Employer contribution
7.65%

Combined Employee and Employer FICA Tax Rates
15.30%

Maximum Taxable Earnings and Taxes Paid
OASDI
HI
Social Security Maximum Taxable Earnings
$137,700
no
maximum
Employee/Employer (each), Maximum Taxes Paid
$8,537
No limit
Self-employed, Maximum Taxes Paid
$17,075
No limit
Maximum Social Security Benefit
Monthly
Annual
Retired at ful retirement age (66)d
$3,011
$36,132
Source: Social Security Administration (SSA), “Social Security Fact Sheet: 2020 Social Security Changes,” at
https://www.ssa.gov/news/press/factsheets/colafacts2020.pdf.
Notes: FICA = Federal Insurance Contributions Act; SECA = Self Employed Contributions Act; OASDI = Old -
Age, Survivors and Disability Insurance; and HI = Hospital Insurance (Medicare Part A).
a. Certain adjustments and income tax deductions apply.
b. The payrol taxes directed to OASI and DI were changed for 2016 to 2018, at 5.015% for OASI and 1.185%
for DI, to extend the projected date of DI reserve depletion about six years (P.L. 114-74).
c. Beginning in 2013, individuals with earned income of more than $200,000 ($250,000 for married couples
filing jointly) pay an additional 0.9% in Medicare taxes. See Social Security Fact Sheet, 2020, at
https://www.ssa.gov/news/press/factsheets/colafacts2020.pdf.
d. Monthly benefits are reduced if a worker claims benefits before his or her ful retirement age; a worker
receives credits that increase his or her monthly benefits if he or she claims benefits after ful retirement
age.

5 T he Social Security benefit formula calculates benefits based on a worker’s highest 35 years of earnings. Monthly
benefits are reduced if a worker claims benefits before his or her full r etirement age; a worker receives credits that
increase his or her monthly benefits if he or she claims benefits after full retirement age. See CRS Report R43542, How
Social Security Benefits Are Com puted: In Brief.
6 Social Security Administration, “Fact Sheet: 2020 Social Security Changes,” at https://www.ssa.gov/news/press/
factsheets/colafacts2020.pdf.
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Workers with Earnings Above the Taxable Earnings
Base
According to the Social Security Administration’s (SSA’s) statistics, a smal share of workers
earn above the taxable earnings base each year. In 2017, about 5.9% of workers (10.2 mil ion
individuals) earned more than the taxable earnings base (Table 2). Most of the individuals
earning above the base were men (7.4 mil ion individuals, or roughly 73.0% of the total).
Approximately 8.3% of al male workers and 3.3% of al female workers had earnings above the
maximum. Most individuals with earnings above the base were wage and salary workers (roughly
94.8% of the total). Some 7.1% of individuals who earned above the base were self-employed. A
relatively smal group of workers who earned above the base (186,000 individuals or 1.8% of the
total) have earnings in both wage and salary employment and self-employment.7
Table 2. Number and Percentage of Workers with Earnings Above the Taxable
Earnings Base of $127,200 by Type of Earnings and Sex, 2017
Percentage of Workers with
Number of Workersa
Earnings Above Taxable

(in thousands)
Earnings Base
Total Workers
Total
with Earnings
with Earnings
Workers
Above the Taxable
Above Taxable
with Any
Group
Total
Earnings Base
Earnings Base
Earnings
All workers
173,010
10,184
100.0%
5.9%
Men
89,478
7,427
72.9%
8.3%
Women
83,532
2,757
27.1%
3.3%
Wage and salary
workers
161,986
9,651
94.8%
6.0%
Men
83,114
7,017
68.9%
8.4%
Women
78,872
2,634
25.9%
3.3%
Self-employed
19,615
719
7.1%
3.7%
Men
10,831
563
5.5%
5.2%
Women
8,784
156
1.5%
1.8%
Waged/salaried and
self-employed
8,591
186
1.8%
2.2%
Source: Social Security Bul etin, Annual Statistical Supplement, 2019, at https://www.ssa.gov/policy/docs/
statcomps/supplement/2019/index.html. Congressional Research Service (CRS) calculations based on 2017
estimates from tables, 4.B1, 4.B3, 4.B4, 4.B7, and 4.B9.
Notes: Totals do not necessarily equal the sum of rounded components.
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.

7 SSA, Annual Statistical Supplement, 2019, tables 4.B1, 4.B3, 4.B4, 4.B7, and 4.B9, at https://www.ssa.gov/policy/
docs/statcomps/supplement/2019/4b.pdf.
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Social Security: Raising or Eliminating the Taxable Earnings Base

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 their plan, and the draft bil
that President Roosevelt sent to Congress did not include one. The bil 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. The committee’s goal in proposing a Social Security program was to complement public
assistance measures (Old-Age Assistance) in its plan.8 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
nonmanual workers earning $250 or more a month from coverage. Manual workers were to be
covered regardless of their earnings, but few had earnings above this level.
It was the Social Security bil reported by the House Ways and Means Committee that clearly
established a maximum taxable amount, which the bil set at $3,000 per year, equivalent to 12
months of earnings at the $250 level.9 In addition, the committee dropped the exemption for
nonmanual 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 the elimination of the high-
earner exemption would include high-income individuals in the system (increasing income to the
system that could be redistributed to low- and middle-income workers) and attain as much
program coverage of the workforce as possible. In addition, the Administration’s original
exemption 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
eliminating the base entirely. In the late 1940s and early 1950s, and to a lesser extent later on, the
major arguments concerned 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 (because benefits are based on a worker’s contribution
into the system via taxes on earnings). Proponents argued that the base needed to be raised to
reflect wage or price growth so that the benefits of recipients, in particular moderate and wel -to-
do recipients, would not erode over time, thereby preserving their support for the system.10 Critics

8 Prior to the enactment of t he Social Security Act, public assistance for the elderly was generally in the form of state
welfare pensions. However, these state pension plans were limited: many had not existed prior to 1930, about 20 states
still lacked a public old-age pension program by 1935, and about 3% of the elderly were receiving benefits, of which
the average benefit amount was 65 cents a day. For more details, see the “State Old-Age Pensions” section of Historical
Background and Development of Social Security, Pre-Social Security Period at https://www.ssa.gov/history/
briefhistory3.html.
9 T he maximum for a worker was to be $3,000 per year per employer, so that, under the original legislation enacted in
1935, a worker could have paid taxes on more than $3,000 in earnings per year (and received benefits from all such
wages) if he or she worked for more than one employer.
10 For example, see Sen. William Benton, “Social Security Amendments of 1950,” Senate debate, Congressional
Record, vol. 96, part 7 (June 19, 1950), p. 8812; and Sen. Ralph Yarborough, “ Social Security Amendments of 1958,”
Senate debate, Congressional Record, vol. 104, part 14 (August 16, 1958), p. 17967.
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argued that this would increase benefits for people who could save on their own while making
saving by private means more difficult.11
Prior to 1974, increases to the taxable earnings bases were specifical y legislated on an ad hoc
basis. However, a period of large increases to the cost of living (e.g., 5.5% in 1970) led to
concerns that such a rise in the cost of living would reduce the purchasing power of Social
Security benefits, and that ad hoc increases might be insufficient.12 President Nixon had
recommended automatic adjustments to benefits in 1969, but efforts in 1970 and 1971 to
incorporate automatic adjustments failed. This changed in 1972, when H.R. 1 (which would
eventual y become the Social Security Amendments of 1972; P.L. 92-603) gained traction. The
bil included a COLA provision, but this provision, along with some others, split off from the
main text, and was enacted under P.L. 92-336 instead. P.L. 92-336 included procedures that
increased the taxable earnings base automatical y as a means of financing COLAs for Social
Security recipients, though the adjustment to the taxable earnings base was tied to average
wages.13
The Social Security Amendments of 1977 (P.L. 95-216) gradual y increased the base beyond what
resulted from the automatic-adjustment procedures from 1978 to 1981, such that in 1981, the
taxable earnings base was $7,500 higher than the “old-law” base.14 This was done as a means of
raising revenue to help shore up the program’s ailing financial condition and was intended to
achieve a base under which 90% of al covered payroll would be subject to tax (to match the
original 1935 act);15 increases to the taxable earnings base after 1981 returned to automatic-
adjustments procedures.
Medicare was enacted in 1965, under the Social Security Amendments of 1965 (P.L. 89-97), with
the HI portion of the program financed by 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.16 The HI rate was subsequently raised periodical y (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. 101-508) raised the HI base to
$125,000. The HI base then rose automatical y 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; with the Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66), the HI
base was removed. As there is no maximum taxable earnings amount in Medicare, Medicare
financing wil not be discussed further in this report.

11 For example, see “Reports of the 1979 Advisory Council on Social Security,” Social Security Bulletin, vol. 43, no. 2
(February 1980), p. 4.
12 For example, see U.S. Congress, Senate Special Committee on Aging, Developments in Aging, 1970, committee
print, prepared by Frank Church, 91st Cong., 1st sess., March 23, 1971, S.Rept. 92-46, p. 1 and U.S. Congress, House
Committee on Ways and Means, Social Security Am endm ents of 1971, committee print, prepared by Wilbur Mills, 92nd
Cong., 1st sess., May 26, 1971, H.Rept. 92-231, pp. 40, 128.
13 For example, see Rep. H. Allen Smith, “Social Security Amendments of 1971,” House debate, Congressional
Record, vol. 117, part 16 (June 21, 1971), p. 21084.
14 For a historical series of the “old law” base, see Social Security Administration, “ Old-law Base and Year of
Coverage,” at http://www.socialsecurity.gov/OACT /COLA/yoc.html.
15 For example, see Rep. William Cotter, “Providing for Consideration of H.R. 9346, Social Security Financing
Amendments of 1977,” House debate, Congressional Record, vol. 123, part 27 (October 26, 1977), p. 35255.
16 T he 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.
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The Taxable Earnings Base Over Time
The portion of Social Security covered earnings that is 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 a low of 71%. Prior to 1972, the
taxable earnings base was updated periodical y by Congress, which contributed to its dramatic
fluctuations in the 1950s and 1960s. Between 1972 and 1977, and since 1982, the base has been
indexed to the increase in wages in the economy, which has reduced the volatility somewhat.17
Figure 1. Percentage of Earnings and Workers Below the Taxable Earnings Base,
1950-2017
shaded bars indicate recessions

Sources: Figure prepared by the Congressional Research Service (CRS) based on data from Social Security
Administration, Annual Statistical Supplement, 2019, Table 4.B1; and U.S. business recessions, as defined by the
National Bureau of Economic Research.
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 is taxed has fal en
from 90% of al earnings in 1982 to 83% in 2000, and it has fluctuated with the business cycle
since then (rising during economic recessions and fal ing during recoveries).18 The large declines
in the percentage of covered earnings from the early 1980s to 2000 were mainly due to salaries
for top earners growing faster than the pay of workers below the cap, which means top earners
had wage growth that was higher than average.19 Because increases in the taxable maximum are

17 As described earlier, to raise revenue, Congress raised the taxable earnings base, with the Social Security
Amendments of 1977 (P.L. 95-216), to a level that would cover 90% of aggregate earnings by 1982.
18 SSA, T he 2020 Annual Report of the Board of T rustees of the Federal Old-Age and Survivors Insurance and Federal
Disability Insurance T rust Funds, p. 146, at https://www.ssa.gov/oact/tr/2020/tr2020.pdf. Estimates are based on
assumptions in 2020 trustees report. T he 20 20 intermediate assumptions reflect the trustees’ understanding of Social
Security at the start of 2020; thus, they do not include potential effects of Coronavirus Disease 2019 (COVID -19).
19 For more on differences in wage growth, see CRS Report R44705, The U.S. Income Distribution: Trends and Issues,
and CRS Report R45090, Real Wage Trends, 1979 to 2018. At least some of this decline and subsequent increase in the
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based on average wage growth, salaries for top earners increased faster than the taxable
maximum. This increasing gap between top earner salaries and the taxable maximum has led to
more earnings that are not covered by payroll taxes (because these earnings are above the taxable
maximum), and thus a decline in the percentage of aggregate covered earnings that is below the
taxable maximum.
The Future of the Taxable Earnings Base
The taxable earnings base is increased annual y 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 (see “The Taxable Earnings Base Over Time”). Under the intermediate assumptions in the
2020 Trustees Report, the percentage of covered earnings that is taxable is assumed to decline to
82.5% for 2029,20 and the levels wil remain stable thereafter.21 The 2020 intermediate
assumptions reflect the trustees’ understanding of Social Security at the start of 2020; thus, they
do not include potential effects of Coronavirus Disease 2019 (COVID-19).
Projections of the Share of the Population Who Have Earned Above
the Taxable Earnings Base at Least Once in Their Lifetime
Workers’ earnings rise and fal during their careers, so any analysis of the population that earns
above the taxable earnings base in a given year is limited in that it may miss individuals who
were above the base in previous years or wil have earnings above the base in the future. SSA’s
Office of Research, Evaluation, and Statistics provides some projections as to how many workers
are expected to ever earn above the taxable earnings base and provides a distribution of these
workers by lifetime shared earnings.
In 2017, about 6% of workers earned more than the taxable earnings base.22 In SSA’s taxable
earnings base fact sheet, it is projected that almost 20% of current and future covered workers
(through birth cohorts born in 2020) wil have at least one year of earnings above the taxable
earnings base.23 Figure 2 shows how this group of workers is projected to stabilize as a

ratio after 2000 is believed to be due to stock option activity surrounding the stock market bubble in 20 00 and is not
likely to recur. See Social Security Administration, The 2005 Annual Report of the Board of Trustees of the Federal
Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, p.104, at https://www.ssa.gov/oact/tr/
T R05/tr05.pdf.
20 T he T rustees Report is the colloquial term for the Annual Report of the Board of Trustees of the Federal Old-Age
and Survivors Insurance and Federal Disability Insurance Trust Funds, an annual report that details the financial
outlook of the Old-Age, Survivors, and Disability Insurance (OASDI) trust funds. T he board of t rustees is composed of
the Secretary of the T reasury, the Secretary of Labor, the Secretary of Health and Human Services, the Commissioner
of Social Security, and two public trustees. T he report makes demographic and economic assumptions to project trust
fund solvency. T o generate a range of possibilities, there are three sets of assumptions: low-, intermediate-, and high-
cost. T he low-cost set of assumptions is meant to show a scenario that is favorable for the program’s financial status.
T he high-cost set of assumptions is meant to show a scenario that is unfavorable for the program’s financial status.
Most projections based on the T rustees Reports, including the T rustees Reports’ primary text, use the intermediate
assumptions.
21 SSA, T he 2020 Annual Report of the Board of T rustees of the Federal Old-Age and Survivors Insurance and Federal
Disability Insurance T rust Funds, p. 146 and p. 189, at https://www.ssa.gov/oact/tr/2020/tr2020.pdf.
22 Social Security Administration, Annual Statistical Supplement, 2019, T able 4.B1, at https://www.ssa.gov/policy/
docs/statcomps/supplement/2019/supplement19.pdf#page=158.
23 T he Social Security Administration’s Office of Retirement Policy , “Population Profiles: T axable Maximum
Earners,” at https://www.ssa.gov/policy/docs/population-profiles/tax-max-earners.html.
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percentage of the population over the next few decades. Note that the figure groups workers by
five-year birth cohorts, so the workers in the last several birth cohorts in the graph have not
entered the labor market yet.
Figure 2. Covered Workers Projected to Earn Above the Taxable
Earnings Base in at Least One Year During Worker’s Career

Source: SSA’s Office of Research, Evaluation, and Statistics, Population Profiles: Taxable Maximum Earners, at
https://www.ssa.gov/policy/docs/population-profiles/tax-max-earners.html.
Notes: Prior to the automatic adjustments of the taxable earnings base in 1974, the irregular changes to the
taxable earnings base, coupled with regular growth in average wages, led to a decline in the real value of the
taxable earnings base. A decrease in the real value of the taxable earnings base meant more workers in earlier
birth cohorts would have earnings above the taxable earnings base (see the percentage of workers with earnings
below Social Security base in Table A-1). With the enactment of automatic adjustments, changes in the real
value of the taxable earnings base were minimized, and the number of covered workers earning above the
taxable earnings base stabilized.
Impact of Raising or Eliminating the Taxable
Earnings Base
Raising or removing the taxable earnings base could reduce the long-term Social Security deficit
(i.e., improve the long-term solvency of the program).24 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 current taxable earnings 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. Although the solvency
impact would be improved to a greater degree if the cap on taxes were eliminated and the cap on
benefits were retained, the traditional link between contributions and benefits would be broken.

24 T here is precedent for eliminating the taxable earnings base. 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.
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Rather than eliminate the taxable earnings 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. Larger increases in the
earnings of the highest-paid individuals relative to other workers have led to a decline in the share
of Social Security covered earnings that is taxed. The proportion of earnings that is taxed is
projected to continue to fal . 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 covered earnings, restoring it to roughly the level of coverage
in 1982, when Congress last undertook a major reform effort to address Social Security solvency.
SSA and the Joint Committee on Taxation (JCT) 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 earnings base on
individuals’ taxes and benefits, on the Social Security trust funds, on federal revenue, and on
workers’ and employers’ behavior.
Impact on Individuals’ Social Security Benefits If the Taxable
Earnings Base Were Raised or Eliminated
SSA’s Office of Research, Evaluation and Statistics provides projections, using the Modeling
Income in the Near Term, Version 7 (MINT7) microsimulation model,25 of the impact of raising
or eliminating the taxable earnings base on benefits in 2030, 2050, and 2070.26 The estimates for
raising the amount of earnings subject to the payroll tax to 90% of covered earnings are based on
a phase in from 2015 to 2024. The estimates for eliminating the taxable earnings base are based
on the removal of the taxable earnings base in 2015. Earnings above the current taxable earnings
base are included in the benefit computations. SSA also provides the change in benefits among
different demographic groups and estimates of the median percentage change of benefits for al
beneficiaries and affected beneficiaries.
SSA, however, does not provide projections of the changes in taxes paid by demographic groups.
Because of the linking of taxes and benefits in this proposal, the change in benefits provides an
idea of how many individuals are paying more taxes, but the values are not identical. Dependents
receive higher benefits when a worker pays more in taxes, so beneficiaries with higher benefits
might not have paid higher taxes based on their own working records. Retired worker benefits

25 T he Modeling Income in the Near T erm, Version 7 (MINT 7) is a microsimulation that matches Social Security’s
administrative records to survey data from Survey of Income and Program Participation (SIPP), a detailed Census
Bureau survey. Economic, demographic, and programmatic assumptions are based on the 2012 T rustees Report. For
more information on the MINT7 model, see the Office of Retirement Policy’s description of the model at
https://www.ssa.gov/retirementpolicy/projection-methodology.html and Urban Institute’s primer at
http://www.urban.org/research/publication/primer-modeling-income-near-term-version-7-mint7.
26 Urban Institute provides an alternative set of projections of the effect of raising the taxable earnings base on annual
per capita income (including annuity and cash income) by source and taxes by source of individuals aged 62 and older
through 2065 in 10-year increments. T he changes include increasing the taxable earnings base to $150,000 over a 2 -
year period, increasing the taxable earnings base to $180,000 ov er a 2-year period, and increasing the taxable earnings
base to cover 90% of payroll over a 10-year period. All changes begin in 2016. T hese projections are made using the
Dynamic Simulation of Income Model (DYNASIM) microsimulation, “taking a representative sample of individuals
and families and ages them year by year, simulating key demographic, economic and health events... T hese transitions
are based on probabilities generated by carefully calibrated equations estimated from nationally representative
household survey data” (DYNASIM: Projecting Am erican’s Future Well-Being, September 2015). For more details on
the DYNASIM model, see http://www.urban.org/sites/default/files/publication/65826/2000370-DYNASIM-Projecting-
Older-Americans-Future-Well-Being.pdf.
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represent three-quarters of the affected beneficiaries; spouse and widow(er) benefits make up
around a quarter of the affected beneficiaries.27
Based on the projections, if the taxable earnings base were eliminated and al earnings were
subject to the Social Security payroll tax, 6% of al beneficiaries would receive a higher benefit
amount in 2030, with a median percentage increase in benefits of 4% for affected beneficiaries.
The percentage of beneficiaries affected would be 16% in 2050 and 19% in 2070, and the median
percentage change in benefits would be 6% in 2050 and 8% in 2070.28 Phasing in the increase to
the taxable earnings base to make 90% of covered earnings subject to the payroll tax leads to a
median percentage change in benefits of 2% in 2030, 5% in 2050, and 7% in 2070 for affected
beneficiaries.29
The discussion of the impact on beneficiaries by group wil use the projections from eliminating
the taxable earnings base, to avoid complications with how the change is phased in (because the
projections for raising the amount of earnings subject to the payroll tax to 90% are based on a
phase in from 2015 to 2024, while the projections for eliminating the taxable earnings base are
based on an immediate elimination), coupled with the fact that beneficiaries whose benefits
change by less than 1% are not considered affected in the projections.30
Changes by Income Group
Figure 3 shows that the impact of eliminating the taxable earnings base immediately on future
beneficiaries varies significantly by income group (quintiles).31 Few beneficiaries in the lowest
quintile would see an increase in benefits in 2030, compared with 17% of beneficiaries in the
highest quintile who would gain increased benefits if the taxable earnings base were eliminated.
The percentage of beneficiaries affected by eliminating the taxable earnings base more than
doubles in 2050. By 2070, almost half of the beneficiaries in the highest quintile would have an
increase in benefits if the taxable earnings base was removed.

27 SSA, Office of Retirement Policy; T able 1 from https://www.ssa.gov/retirementpolicy/projections/taxation/remove-
tax-max-include-2030.html and https://www.ssa.gov/retirementpolicy/projections/taxation/90-percent-tax-max-include-
2030.html.
28 SSA, Office of Retirement Policy; T able 1 from https://www.ssa.gov/retirementpolicy/projections/taxation/remove-
tax-max-include-2030.html, https://www.ssa.gov/retirementpolicy/projections/taxation/remove-tax-max-include-
2050.html, and https://www.ssa.gov/retirementpolicy/projections/taxation/remove-tax-max-include-2070.html.
29 SSA, Office of Retirement Policy; T able 1 from https://www.ssa.gov/retirementpolicy/projections/taxation/90-
percent -tax-max-include-2030.html,
https://www.ssa.gov/retirementpolicy/projections/taxation/90-percent-tax-max-include-2050.html, and
https://www.ssa.gov/retirementpolicy/projections/taxation/90-percent-tax-max-include-2070.html.
30 T he same number of beneficiaries would be affected by either raising or eliminating the taxable earnings base,
assuming identical implementation schedule (immediately or phased in): a worker earning above the current taxable
maximum will pay more in payroll taxes (and receive more benefits) regardless of whether the taxable earnings base
was increased or eliminated. However, a gradual phase in could result in small increases to benefits that are not
considered affected in the projections due to increases in benefits of less than 1% not counting as having a change in
benefits. Because of this, the percentage of beneficiaries with higher benefits after phasing in benefits is consistently
lower than the projections for when the taxable earnings base is eliminated immediately.
31 Income groups are defined using annual family income for the year of the projection (2030, 2050, and 2070) after an
individual claims disability, retirement, survivor, or spousal benefits. Households are divided up into five groups
(quintiles) based on their income; the 20% of households with the lowest incomes are in the first quintile, the 20% of
households with the next lowest incomes are in the second quintile, and so on.
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Figure 3. Projected Percentage of Future Beneficiaries Affected by Eliminating the
Taxable Earnings Base, by Income Quintile

Sources: SSA, Office of Research, Evaluation, and Statistics; Table 1 from https://www.ssa.gov/retirementpolicy/
projections/taxation/remove-tax-max-include-2030.html, https://www.ssa.gov/retirementpolicy/projections/
taxation/remove-tax-max-include-2050.html, and https://www.ssa.gov/retirementpolicy/project ions/taxation/
remove-tax-max-include-2070.html.
Notes: The projected percentage increase of beneficiaries in the lowest quintile in 2030 shows 0% due to
rounding. Income groups are defined using annual family income for the year of the projection, so some low-
income beneficiaries are affected by the policy if they earned above the taxable earnings base at any point in their
careers. Beneficiaries must receive a greater than 1% difference in benefits in order to be considered affected.
The SSA analysis suggests that increases in benefit amounts among affected beneficiaries would
be similar for the lower four quintiles across the three different projection years, with a median
percentage change between 3% and 7%. The changes fluctuate slightly between each projection
year, but remain relatively stable. Conversely, the highest quintile would see an increase in
median change in benefits, from 5% in 2030 to 13% in 2070.32
Changes by Age
The percentage of future beneficiaries affected, by age, with the elimination of the taxable
earnings base is shown in Figure 4. In 2030, very few people aged 80 and older would have
higher benefits if the taxable earnings base had been eliminated in 2015. These workers would
have been over 65 years old in 2015, and are likely to have retired already. In 2050, the
percentage of beneficiaries in the different age groups that have higher benefits would be higher.
Similar to 2030, older cohorts would have fewer beneficiaries with higher benefits, although the
age cutoff is 90 and older, as opposed to 80. This percentage changes in 2070, in which the largest
change in beneficiaries with higher benefits would happen for the older cohorts.

32 SSA, Office of Retirement Policy; T able 1 from https://www.ssa.gov/retirementpolicy/projections/taxation/remove-
tax-max-include-2030.html, https://www.ssa.gov/retirementpolicy/projections/taxation/remove-tax-max-include-
2050.html, and https://www.ssa.gov/retirementpolicy/projections/taxation/remove-tax-max-include-2070.html.
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Social Security: Raising or Eliminating the Taxable Earnings Base

Figure 4. Projected Percentage of Future Beneficiaries Affected by Eliminating the
Taxable Earnings Base, by Age

Sources: SSA, Office of Research, Evaluation, and Statistics; Table 1 from https://www.ssa.gov/retirementpolicy/
projections/taxation/remove-tax-max-include-2030.html, https://www.ssa.gov/retirementpolicy/projections/
taxation/remove-tax-max-include-2050.html, and https://www.ssa.gov/retirementpolicy/project ions/taxation/
remove-tax-max-include-2070.html.
Notes: The projected percentage increase of beneficiaries in the aged 80-89 group in 2030 shows 0% due to
rounding; the projected percentage increase of beneficiaries in the aged 90+ group in 2030 is a true 0%.
The change in benefit amounts among affected beneficiaries tends to increase in the later years.
Older cohorts have a smal er median change in benefit amounts, as they have fewer years of
contributing higher taxes. The cohort aged 60-69 in 2050 would not have had the taxable earnings
base, and thus would have no cap on benefits, for much of their career, whereas the cohort aged
90+ has only a few years’ worth of potential to earn higher benefits. By 2070, al cohorts would
have had most or al of their careers without the taxable earnings base, and the median percentage
change in benefits would be about 8% for al age cohorts.33
Impact on the Social Security Trust Funds
The 2020 Trustees Report projects that without any changes to current law, the OASDI trust funds
would be depleted (i.e., the trust fund wil have a balance of zero) in 2035.34 Under the
intermediate assumptions of the 2020 Trustees Report, SSA actuaries calculate that it would take
an immediate and permanent 3.14% increase in the payroll tax rate (from 12.40% to 15.54%) to
achieve solvency over the next 75 years.35 The actuaries have estimated the impact on the trust

33 SSA, Office of Retirement Policy; T able 1 from https://www.ssa.gov/retirementpolicy/projections/taxation/remove-
tax-max-include-2030.html, https://www.ssa.gov/retirementpolicy/projections/taxation/remove-tax-max-include-
2050.html, and https://www.ssa.gov/retirementpolicy/projections/taxation/remove-tax-max-include-2070.html.
34 SSA, The 2020 Annual Report of the Board of Trustees of the Federal Old -Age and Survivors Insurance and Federal
Disability Insurance Trust Funds, at https://www.ssa.gov/oact/tr/2020/tr2020.pdf. Estimates are based on assumptions
in 2020 trustees report. The 2020 intermediate assumptions reflect the trustees’ understanding of Social Security at the
start of 2020; thus, they do not include potential effects of Coronavirus Disease 2019 (COVID -19).
35 In 2020, the Social Security trustees project that the 75-year actuarial deficit for the trust funds is equal to 3.21% of
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funds of numerous policies related to the taxable earnings base.36 Contributions can be increased
by (1) eliminating the taxable earnings base immediately or in a future year, (2) raising the
taxable earnings base such that, for example, 90% of earnings are subject to the payroll tax, (3)
taxing earnings above the current taxable earnings base at a lower payroll tax rate, or (4) taxing
earnings above a certain threshold that is greater than the current-law taxable maximum at the
current payroll tax rate. To accommodate changes to the payroll tax, benefits associated with
earnings above the current taxable earnings base can be (1) credited the same as the earnings
below the current taxable earnings base; (2) stil counted toward benefits, but at a reduced rate; or
(3) not credited at al .37
Table 3 presents some trust fund solvency outcomes of a few of these proposals, as estimated by
SSA’s Office of the Chief Actuary: the percentage of the 75-year shortfal eliminated with the
proposal and the 75-year shortfal as a percentage of taxable payroll (the percentage that the
payroll tax rate would have to be raised for the system to be solvent over the next 75 years). None
of the proposals involving a change to the taxable earnings base results in long-term (75-year)
solvency. The table focuses on eliminating and raising the taxable earnings base, because these
two changes to the contributions include different proposals on how to change the benefits, and
il ustrates how contributions and benefits interact to affect the long-range shortfal . A brief
discussion on the impact of applying a payroll tax above the current taxable earnings base is
included below.

taxable payroll. Stated a different way, the trustees point out that an immediate 3.14 -percentage-point increase in the
payroll tax rate (from 12.40% to 15.54%) would be needed for the trust funds to remain solvent throughout the 75 -year
projection period. T he necessary tax rate increase of 3.14% differs from the 3.21% actuarial deficit for two reasons.
First, the estimated tax increase projects zero trust funds reserves at the end of the projection period, whereas the
actuarial deficit assumes trust fund reserves equal to one year’s cost. Second, the estimated payroll tax increase needed
to maintain solvency does not reflect behavioral response changes to tax rate changes.
36 Projections from various proposals as analyzed by the Social Security Administration’s Office of the Chief Actuary
can be found at https://www.ssa.gov/oact/solvency/provisions/index.html.
37 Benefits are calculated by taking a worker’s summary of lifetime covered (payroll taxed) earnings called the average
indexed m onthly earnings (AIME), which is the average of the 35 highest indexed-earning years divided by 12, and
putting it into a formula to get the prim ary insurance am ount (PIA), which is the worker’s basic benefit amount at full
retirement age, before any adjustments are applied. For more on how benefits are computed, see CRS Report R43542,
How Social Security Benefits Are Com puted: In Brief.
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Table 3. Impact on the Social Security Trust Funds of Raising or
Eliminating the Social Security Taxable Earnings Base
Remaining
75-year
Percentage
Shortfall as
of 75-year
Percentage
Shortfall
of Taxable
Options
Eliminated
Payroll
Current Law based on 2020 Trustees Report
—
3.21a
Tax all earnings above the current-law taxable maximum:
1. Eliminate taxable earnings base, so all earnings are subject to current payroll tax, with…
1A
No credit to benefits (retain cap for benefit calculations)
73%
0.85
1B
Credit to benefits (current benefit formula)
55%
1.43
1C
Adjusted benefits (new benefit formula)b
66%
1.09
1D
Phased in 2021-2027 (new benefit formula)c
68%
1.03
1E
Phased in 2022-2026 (new benefit formula)d
65%
1.13
1F
Phased in 2023-2032 (new benefit formula)b
59%
1.31
2. Tax earnings above a certain threshold at current payroll tax rate, and tax all earnings once the
current-law maximum exceeds that amount, with the threshold equal to…
2A
$250,000 beginning in 2021 (retain cap for benefit calculations)
70%
0.98
2B
$400,000 beginning in 2022 (new benefit formula)e
60%
1.29
2C
$250,000 beginning in 2022 (new benefit formula)e
67%
1.07
2D
$300,000 beginning in 2022 (new benefit formula)f
63%
1.17
Tax a portion of earnings above the current-law taxable maximum:
3. Increase taxable earnings base so 90% of covered earnings are subject to payroll tax (phased in
2021-2030), with...
3A
No credit to benefits (retain cap for benefit calculations)
31%
2.22
3B
Credit to benefits (current benefit formula)
22%
2.49
3C
Phased in 2022-2027 with adjusted benefits (new benefit formula)g
30%
2.25
3D
Apply 6.2% tax rate for earnings above the revised taxable maximum,
credit to benefits up to revised taxable maximum
42%
1.86
4. Increase the taxable maximum by 2% each year until reach 90% of covered earnings, with...
4A
No credit to benefits beginning in 2023 (retain cap for benefit
calculations)
24%
2.44
4B
Credit to benefits beginning in 2021 (current benefit formula)
19%
2.60
4C
Adjusted benefits beginning in 2022 (new benefit formula)h
20%
2.58
4D
For employee only, while eliminating taxable maximum for employer
44%
1.80
beginning in 2021 (current benefit formula using revised tax
maximum)
Sources: SSA’s Office of the Chief Actuary, Solvency Provisions: Payrol Taxes, at https://www.ssa.gov/OACT/
solvency/provisions/payrol tax.html, as retrieved in August 2020. Options listed in this table include (in order
from top to bottom) E2.1, E2.2, E2.3, E2.4, E2.11, E2.12, E2.5, E2.13, E2.14, E2.15, E3.2, E3.1, E3.19, E3.15, E3.6,
E3.5, E3.7, and E3.14.
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Notes: Projections based on intermediate assumptions of 2020 Trustees Report. The Trustees Report uses
three sets of assumptions to project trust fund solvency to generate a range of possibilities: low cost,
intermediate cost, and high cost. The Trustees Report’s primary text uses the intermediate (cost) assumptions.
The 2020 intermediate assumptions reflect the trustees’ understanding of Social Security at the start of 2020;
thus, they do not include potential effects of Coronavirus Disease 2019 (COVID-19).
a. In 2020, the Social Security trustees project that the 75-year actuarial deficit for the trust funds is equal to
3.21% of taxable payrol . Stated a different way, the trustees point out that an immediate 3.14-percentage-
point increase in the payrol tax rate (from 12.40% to 15.54%) would be needed for the trust funds to
remain solvent throughout the 75-year projection period. The necessary tax rate increase of 3.14% differs
from the 3.21% actuarial deficit for two reasons. First, the estimated tax increase projects zero trust funds
reserves at the end of the projection period whereas the actuarial deficit assumes trust fund reserves equal
to one year’s cost. Second, the estimated payrol tax increase needed to maintain solvency does not reflect
behavioral response changes to tax rate changes.
b. New benefit calculation: add a bend point at current taxable earnings base and apply a formula factor of 3%
to AIME above the new bend point. See footnote 37 for a summary on how Social Security benefits are
calculated under current law.
c. Calculate benefit credit for earnings above the current-law taxable maximum that are subject to the payrol
tax using a secondary PIA formula, which involves (1) an “AIME+” derived from annual earnings from each
year after 2020 that were in excess of that year’s current-law taxable maximum; (2) a new bend point equal
to 134% of the monthly current-law taxable maximum; and (3) formula factors of 3% and 0.25% below and
above the new bend point, respectively.
d. Calculate benefit credit for earnings above the current-law taxable maximum that are subject to the payrol
tax using a secondary PIA formula, which involves (1) an AIME+ derived from annual earnings from each
year after 2021 that were in excess of that year’s current-law taxable maximum and (2) a formula factor of
5% on this newly computed AIME+.
e. Calculate benefit credit for earnings above the current-law taxable maximum that are subject to the payrol
tax using a secondary PIA formula, which involves (1) an AIME+ derived from annual earnings from each
year after 2021 that were in excess of that year’s current-law taxable maximum and (2) a formula factor of
2% on this newly computed AIME+.
f.
Calculate benefit credit for earnings above the current-law taxable maximum that are subject to the payrol
tax using a secondary PIA formula, which involves (1) an AIME+ derived from annual earnings from each
year after 2021 that were in excess of that year’s current-law taxable maximum and (2) a formula factor of
3% on this newly computed AIME+.
g. Calculate benefit credit for earnings above the current-law taxable maximum that are subject to the payrol
tax using a secondary PIA formula, which involves (1) an AIME+ derived from annual earnings that were in
excess of that year’s current-law taxable maximum and (2) a formula factor of 2.5% on this newly computed
AIME+.
h. New benefit calculation: add a bend point at current taxable earnings base and apply a formula factor of 5%
to AIME above the new bend point.
Option 1A-1C: Eliminate Taxable Earnings Base Immediately
The Social Security Administration’s Office of the Chief Actuary analyzed several proposals that
involve eliminating the taxable earnings base immediately, so that al earnings are taxed; these
proposals differ based on how benefits are calculated to take into account earnings above the
current taxable earnings base. In al of these proposals, the trust fund depletion date is pushed
back by at least 30 years. If no credits to benefits are provided for earnings above the current
taxable earnings base (i.e., earnings above the current taxable earnings base do not count toward
benefits),38 the trust fund becomes depleted a little less than a decade before the long-range 75-
year solvency target. The increased revenue would eliminate 73% of the projected shortfal and
the program would have a projected shortfal equal to 0.85% of taxable payroll. Under this
scenario, the payroll tax rate would need to be increased from 12.40% to 13.25% or other policy

38 An example of this proposal can be found in the Fair Adjustment and Income Revenue for Social Security Act (H.R.
1984, 114th Congress).
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changes would have to be made for the system to be 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.
If al wages counted toward benefits as they are now,39 the trust fund would be depleted in 2056;
55% of the projected financial shortfal in the Social Security program would be eliminated. To
achieve solvency for the full 75-year projection period, the option would require an increase of
1.43% in total payroll tax rate (from 12.40% to 13.83%) or other policy changes would have to be
made to cover the shortfal . Under this scenario, high earners would pay higher taxes but also
receive higher benefits, maintaining the traditional link between the tax paid and benefits
received. The net benefit to the trust funds is stil positive, as $5 in additional revenue would
provide only $1 in additional benefits, on average, over their 75-year valuation period. Some
annual Social Security benefit payments would be much higher than today’s annual maximum (if
claimed at full retirement age) of $36,132. To contextualize how benefits are affected by the
increase in contributions, authors Reno and Lavery estimate that 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%, whereas someone with lifetime earnings of $1 mil ion 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%.40
One possibility to maintain the link between contributions and benefits, but limit the benefits for
high earners, is to change the benefit formula. This is general y done by adding a new bend point,
with a lower conversion rate for the additional contributions above the current-law taxable
earnings base. The proposals scored by SSA that contain a provision with a new benefit formula
have projections that are close to halfway between the “no additional benefit” and the “current
benefit” proposals. The proposal that changes the benefit computation formula to include a new
bend point at the current-law taxable earnings base and applies a formula factor of 3% for AIME
above this new bend point extends the year of trust fund depletion to 2060.41 This proposal
eliminates 66% of the projected shortfal , and the payroll tax would need to increase from 12.40%
to 13.49% or other policy changes would have to be made for the system to be solvent for the
next 75 years.
Options 1D-1F: Eliminate Taxable Earnings Base Gradually
Some proposals suggest gradual y eliminating the taxable earnings base so full elimination takes
place some time between 2026 and 2032. These proposals were usual y accompanied with a
secondary PIA formula.42 This secondary PIA formula general y involves a new term cal ed
AIME+, which is derived from annual earnings in excess of the current-law taxable maximum
and a new formula factor between 2% and 5% is set on the newly computed AIME+. Sometimes,

39 T his proposal can be found in Virginia Reno and Joni Lavery, Fixing Social Security: Adequate Benefits, Adequate
Financing, National Academy of Social Insurance, October 2009.
40 Calculations are for 2005 from Virginia Reno and Joni Lavery, Options to Balance Social Security Funds, February
2005. T he current monthly benefits from the respective examples will be higher, due to increases to bend points.
Benefits this high would be rare because few workers earn above the taxable earnings base for their entire career.
41 T his proposal can be found in Virginia Reno and Joni Lavery, Fixing Social Security: Adequate Benefits, Adequate
Financing, National Academy of Social Insurance, October 2009.
42 Examples of option 1D include the Protecting and Preserving Social Security Act ( H.R. 2302 and S. 1132 in 2019
[116th Congress]; H.R. 3302 and S. 1600 in 2017 [115th Congress]; H.R. 1811 in 2015 [114th Congress]; and H.R. 5834
in 2010 [111th Congress]). Option 1E was included in the Strengthening Social Security Act of 2016 ( H.R. 5952, 114th
Congress), the Safeguarding American Families and Expanding Social Security Act of 2015 (S. 1940, 114th Congress),
and the Strengthening Social Security Act of 2013 (S. 567, 113th Congress). Option 1F refers to the Social Security
Enhancement and Protection Act of 2013 (H.R. 1374, 113th Congress).
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a new bend point is created together with this secondary PIA formula. These proposals general y
increase the long-term revenue of Social Security trust funds and would eliminate about 59%-
68% of the projected 75-year shortfal . The payroll tax rate would need to be increased from the
current 12.40% to about 13.43%-13.71%, or other policy changes would have to be made for the
system to be solvent for the next 75 years.
Option 2: Taxes on Earnings Above a Certain Threshold Until the Taxable
Earnings Base is Eliminated
Several recent proposals suggest applying the current payroll tax rate on earnings above a certain
threshold and taxing al earnings once the current-law taxable maximum exceeds that threshold. A
secondary PIA formula was also proposed to provide benefit credit for earnings above the
current-law taxable maximum, which involves a new item cal ed AIME+ derived from annual
earnings from each year in excess of the taxable maximum, and a formula factor of 2%-3% on
this AIME+ amount.43 These proposals would have a budgetary effect of eliminating 60%-70% of
the projected financial shortfal and requiring an increase of 0.98%-1.29% in the payroll tax, or
other policy changes would have to be made to eliminate the shortfal for the next 75 years. Some
of these proposals delay the date of trust fund depletion by about 10-24 years.
Options 3 and 4: Increase Taxable Earnings Base to Cover 90% of Earnings
Proposals from various organizations to increase the taxable earnings base to cover 90% of
earnings general y follow two approaches to phasing in the new taxable earnings base. One
option is to phase in the increase over the next 10 years (option 3); the other option is to increase
the taxable earnings base by an additional 2% on top of year-to-year indexing, until taxable
earnings cover 90% of covered earnings (option 4). The second method is estimated to take
around 40 years to cover 90% of earnings.
Most proposals in option 3 (3A-3C) would delay the date of trust fund depletion by fewer than
five years. Phasing in the increase over the next 10 years could cover 22%-31% of the projected
long-range shortfal , requiring an increase of 2.22%-2.49% in the payroll tax, or other policy
changes would have to be made to eliminate the shortfal for the next 75 years.44 A variation of
this option (option 3D) suggested applying the 6.2% tax rate for earnings above the revised
taxable maximum (90% of covered earnings), but no credit to benefits above the revised taxable
maximum. This proposal could eliminate 42% of the 75-year financial shortfal and the program
would have a remaining projected shortfal equal to 1.86% of taxable payroll.
Phasing in the increase by raising the taxable earnings base by an additional 2% a year wil cover
approximately 19%-24% of the shortfal (Option 4A-4C).45 In these cases, paying higher benefits

43 Examples of this proposal include the Social Security Expansion Act (H.R. 1170 and S. 478 in the 116th Congress;
and H.R. 1114 and S. 427 in the 115th Congress), proposing a payroll tax on earnings above $250,000 and retaining the
cap for benefit calculations; the Save Social Security Act of 2017 ( H.R. 1631, 115th Congress), proposing a payroll tax
on earnings above $300,000 and a formula factor of 3% on AIME+; the Social Security for Future Generations Act of
2017 (H.R. 2855, 115th Congress), proposing a payroll tax on earnings above $250,000 and a formula factor of 2% on
AIME+; and the Social Security 2100 Act (H.R. 860 and S. 269 in the 116th Congress; H.R. 1902 and S. 2671 in the
115th Congress), proposing a payroll tax on earnings above $400,000 and a formula factor of 2% on AIME+.
44 A similar proposal can be found in Liebman, MacGuineas, and Samwick, Nonpartisan Social Security Reform Plan,
December 2005, at https://www.hks.harvard.edu/jeffreyliebman/lms_nonpartisan_plan_description.pdf, and in the
S.O.S. Act of 2016 (H.R. 5747, 114th Congress).
45 Proposals that include a phase in by increasing the taxable earnings base by an additional 2% a year include a
proposal by the Bipartisan Policy Center Debt Reduction T ask Force, Restoring Am erica’s Future, November 2010;
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on the additional covered earnings does little to change the fund depletion date. An alternative
option proposed increasing (phased in) the taxable earnings base to 90% of covered earnings only
to employees,46 but eliminating taxable maximum for employers. Applying the current benefit
formula to the revised taxable maximum for employees, the provision could eliminate 44% of the
projected long-range shortfal and the payroll tax rate would need to be increased from 12.40% to
about 14.20%, or other policy changes would have to be made for the system to be solvent for the
next 75 years.
Taxes for Earnings Above the Taxable Earnings Base
SSA scored several proposals that apply a new lower payroll tax rate to earnings above the
taxable earnings base.47 This is similar to eliminating the taxable earnings base, but reducing the
payroll tax rate workers have to pay on those higher earnings. Proposals general y have tax rates
between 2% and 3%, with some proposals al owing for the higher tax rates to be phased in over
the course of a few years. Most of these proposals do not include higher benefits and would
eliminate less than 20% of the funding shortfal .48
A group of proposals that would tax a portion of earnings above the current taxable maximum are
characterized as setting a wage-indexed equivalent threshold.49 The earnings above the threshold
would be taxed at a lower payroll tax rate, such as 2%, and the benefits for additional earnings
taxed could be either not credited or proportionally credited based on the payroll tax rate on the
additional earnings divided by the original 12.4% payroll tax rate. These proposals general y had
little effect on the trust fund’s long-range financial solvency.
Impact on Federal Revenue
Raising the taxable earnings base would lead to an increase in total federal revenues. JCT and the
Congressional Budget Office (CBO) estimated that raising the wage base to cover 90% of
earnings to $285,000 in 2019 would generate $350.2 bil ion in additional revenue over the 5-year
budget window (2019-2023) and $804.9 bil ion over the 10-year window (2019-2028).50 These
estimates reflect CBO’s understanding of Social Security in 2018; thus, they do not include
potential effects of COVID-19. The change in revenues would consist of an increase in receipts
from Social Security payroll taxes, which would be off-budget, offset in part by a reduction in

and a proposal by the National Commission on Fiscal Responsibility and Reform, The Mom ent of Truth: Report of the
National Com m ission on Fiscal Responsibility and Reform , December 2010.
46 A detailed description of this option is available at https://www.ssa.gov/OACT /solvency/NASI_20091030.pdf; also
see proposal offered in U.S. Congress, Senate Special Committee on Aging, Social Security Modernization: Options to
Address Solvency and Benefit Adequacy, 111th Cong., 2nd sess., S.Rept. 111-187, May 13, 2010.
47 An example of this option can be found in the Social Security Forever Act of 2009 ( H.R. 1863). Other similar
proposals were included in SSA estimates for AARP Public Policy Institute, at https://www.ssa.gov/OACT /solvency/
AARP_20080619.pdf, and for National Research Council and the National Academy of Public Administration, at
https://www.ssa.gov/OACT /solvency/NRCNAPA_20100113.pdf.
48 See SSA’s Office of the Chief Actuary, “Solvency Provisions: Payroll T axes,” E2.6 and E2.8, at
https://www.ssa.gov/OACT /solvency/provisions/payrolltax.html.
49 See Letter from Stephen C. Goss, chief actuary, to Johnson, Brady, and Ryan, May 12, 2010, at https://www.ssa.gov/
oact/solvency/JohnsonBradyRyan_20100512.pdf; and Letter from Stephen C. Goss, chief actuary, to Begich and
Murray, June 10, 2014, at https://www.ssa.gov/oact/solvency/BegichMurray_20140610.pdf.
50 Congressional Budget Office (CBO), Budget Options, Revenue Option: Increase the Maximum Taxable Earnings for
the Social Security Payroll Tax, December 2018, at https://www.cbo.gov/budget -options/2018/54806.
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Social Security: Raising or Eliminating the Taxable Earnings Base

individual income tax revenues, which would be on-budget.51 The reduction in income tax
revenue is due to the decrease in after-tax take-home pay leading to fewer hours worked and a
substitution to (payroll) tax-exempt fringe benefits in lieu of wages. Outlays, via additional
payments of Social Security benefits, would total about $19.8 bil ion over the 10-year period, and
would be classified as off-budget.
Table 4. Effect on the Deficit: Increasing the Maximum Taxable Earnings for the
Social Security Payroll Tax to $285,000 in 2019, Cover 90% of Aggregate Covered
Earnings
(in bil ions of dol ars)

Total
2019-
2019-

2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2023
2028
Change in
0.1
0.3
0.6
1.0
1.4
1.9
2.5
3.2
4.0
4.9
3.4
19.8
outlays
Change in
23.9
77.0
81.0
83.4
84.9
86.8
89.0
90.9
92.6
95.2
350.2
804.9
revenues
Change in
-23.8
-76.7
-80.4
-82.4
-83.5
-84.9
-86.5
-87.7
-88.6
-90.3
-346.8 -785.1
the deficit
Sources: Staff of the Joint Committee on Taxation (JCT); Congressional Budget Office (CBO), “Increase the
Maximum Taxable Earnings for the Social Security Payrol Tax,” December 2018, at https://www.cbo.gov/budget-
options/2018/54806. The estimates reflect CBO’s understanding of Social Security in 2018; thus, they do not
include potential effects of Coronavirus Disease 2019 (COVID-19).
Note: Based on option taking effect in January 2019.
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. Behavioral changes were not taken into consideration in the above
estimates of the distributional and trust fund impacts, and only partial y accounted for in the
revenue analysis.
Workers who earn more than the taxable maximum would have a reduced incentive to work,
because workers pay more in taxes than they expect to receive in lifetime Social Security benefits
and this effectively reduces the return to work.52 However, the degree to which the work effort
wil be reduced is a matter of debate; each worker would face a different choice between the

51 From 1935 to 1968 and since 1986, the Social Security program has been off-budget. T he program is self-financing,
and the Social Security trust funds are displayed separately in the federal budget. T his means that SSA is, for the most
part, not subject to the standard budget and appropriations process (the exception is the administrative budget for SSA,
which SSA must present as a budget request and is subject to the standard review procedures of the Office of
Management and Budget and the budget and appropriations committees o f Congress). T he program can be and has
been a component of unified budget calculations. For more details on the relationship between the Social Security trust
funds and the federal budget, see “Research Note #20: T he Social Security T rust Funds and the Federal Budget,”
available at https://www.ssa.gov/history/BudgetT reatment.html; and CRS In Focus IF11615, The Social Security Trust
Funds and the Budget.
52 U.S. Department of T reasury, Social Security Issue Brief, No. 6, Social Security Reform: Work in Incentives,
retrieved on July 5, 2018, available at https://www.treasury.gov/resource-center/economic-policy/ss-medicare/
Documents/treasury%20ss%20issue%20brief%20no%20%206.pdf.
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reduced earnings and the additional leisure time, based on the worker’s individual preferences.53
Workers earning 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.54
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 earnings base toward Social Security. If
employers are unable to pass along the higher tax costs to workers in the form of reduced
earnings, their overal labor costs wil increase. Employers may react by raising prices to
consumers; reducing other nonwage forms of compensation, such as health benefits or pensions;
or reducing the number of workers.
Arguments For and Against Raising or Eliminating
the Base
Some 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 above
maximum taxable earnings. Workers earning less than the base have a greater proportion of
earnings taxed than workers whose earnings exceed it.55 In 2020, someone with annual earnings
of $50,000 pays $3,100 in Social Security taxes, or 6.2% of his or her earnings (ignoring the
employer share of the tax). However, because the tax is levied on only the first $137,700 in
earnings, someone earning $200,000 a year pays $8,537, or 4.2% 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 proportion of covered
earnings that escapes Social Security payroll taxation has risen from 12% to 17% since 1991 (see
Table A-1). They therefore contend that the current Social Security payroll tax structure favors a
smal group of the higher-earning workers in society.
Supporters argue that subjecting a larger percentage of earnings to the payroll tax would also
adjust for the higher life expectancies of high earners.56 On average, people with more education
and higher earnings live longer than those with less education and lower earnings, and this
difference has been growing over time.57 The impact on the Social Security program is that
higher-earning individuals receive benefits for more years over their lifetimes, making the system

53 Gender, marital status, and wage all play a role in the labor supply decision. For a review of how these dynamics
interact to affect an individual’s decision to work, see Robert McClelland and Shannon Mok, A Review of Recent
Research on Labor Supply Elasticities, CBO, Working Paper no. 2012-12, October 2012, at https://www.cbo.gov/sites/
default/files/112th-congress-2011-2012/workingpaper/10-25-2012-
Recent_Research_on_Labor_Supply_Elasticities_0.pdf.
54 See Martin Sullivan, “Budget Magic and the Social Security T ax Cap,” Tax Notes, March 14, 2005.
55 See Center on Budget and Policy Priorities, Policy Basics: Federal Payroll Taxes, March 23, 2016, at
http://www.cbpp.org/research/federal-tax/policy-basics-federal-payroll-taxes.
56 See Peter Diamond and Peter Orszag, Saving Social Security: A Balanced Approach, Brookings Institution, 2004.
57 See CRS Report R44846, The Growing Gap in Life Expectancy by Income: Recent Evidence and Implications for the
Social Security Retirem ent Age, by Katelin P. Isaacs and Sharmila Choudhury.
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less progressive.58 Supporters claim that raising the taxable earnings base would make a
reasonable adjustment for the faster-than-average life expectancy gains among high earners.
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. Other options
would be to remove the taxable maximum, but lower the tax rate on those higher earnings or tax
employers and employees at different rates above the current base (see various proposals in Table
3). Others have cal ed for broadening the sources of income that are taxed beyond earnings.59
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 although earnings above the taxable
maximum are not subject to the payroll tax, Social Security benefits are stil progressive based on
how they are calculated.60
Supporters 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 $56,844 in 2020 for married workers with three or more
children (up to $21,710 for married workers without children).61 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.62
Critics also argue that raising the cap wil serve as a disincentive to work and could serve as a
drain on the economy.63 Because additional work effort would cause lifetime payroll taxes to
increase by more than lifetime Social Security benefits, opponents claim that workers faced with
lower marginal rewards for work would either reduce their hours or avoid the tax by changing the
form of their compensation.
There are additional arguments against eliminating the taxable earnings base. For example,
maintaining a base makes Social Security seem less like ordinary income taxation. Another

58 T he 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.
59 Citizens for T ax 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.
60 Kip Hagopian and Lee E. Ohanian, “Payroll T axes are ‘Regressive’? T ime to Rethink that Idea,” The Wall Street
Journal, October 29, 2012.
61 For example, see Sen. Robert C. Byrd, “Revenue Act of 1978,” Senate debate, Congressional Record, vol. 124, part
25 (October 5, 1978), p. 33955.
62 See D. Mark Wilson, A Look at Who Pays the Payroll Tax, T he Heritage Foundation, August 30, 2001, at
http://www.heritage.org/research/reports/2001/08/a-look-at-who-pays-the-payroll-tax.
63 See D. Mark Wilson, Removing the Social Security’s Tax Cap on Wages Would Do More Harm Than Good, T he
Heritage Foundation, October 17, 2001, at http://www.heritage.org/research/reports/2001/10/removing-social-
securitys-tax-cap-on-wages.
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Social Security: Raising or Eliminating the Taxable Earnings Base

argument is that high earners would pay more payroll taxes and receive more benefits after
removing the base, but the larger benefits that high earners would receive would represent a poor
return for the higher taxes they would pay. Some question the wisdom of paying large benefits to
higher-income people, arguing 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. These people contend that
eliminating the base would raise public cynicism about a publicly financed system that pays
enormous benefits to people who already are wel off.
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Appendix. Taxable Earnings Bases: Detailed Table
Table A-1. Social Security and Medicare Tax Rates and Taxable Earnings Bases,
1937-2019
Maximum Taxable

Tax Rates
Earnings
Percentage of
Self-employed
Workers with
Covered
(Social
Earnings
Earnings
Social
Security and
Social
Below Social
Below Social
Year
Securitya
HIa
HI combined)
Security
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
6,600
75.8
80.0
1967
3.900
0.5
6.4
6,600
6,600
73.6
78.1
1968
3.800
0.6
6.4
7,800
7,800
78.6
81.7
1969
4.200
0.6
6.9
7,800
7,800
75.5
80.1
1970
4.200
0.6
6.9
7,800
7,800
74.0
78.2
1971
4.600
0.6
7.5
7,800
7,800
71.7
76.3
1972
4.600
0.6
7.5
9,000
9,000
75.0
78.3
1973
4.850
1.0
8.0
10,800
10,800
79.7
81.8
1974
4.950
0.9
7.9
13,200
13,200
84.9
85.3
1975
4.950
0.9
7.9
14,100
14,100
84.9
84.4
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Maximum Taxable

Tax Rates
Earnings
Percentage of
Self-employed
Workers with
Covered
(Social
Earnings
Earnings
Social
Security and
Social
Below Social
Below Social
Year
Securitya
HIa
HI combined)
Security
HI
Security Base Security Base
1976
4.950
0.9
7.9
15,300
15,300
85.1
84.3
1977
4.950
0.9
7.9
16,500
16,500
85.2
85.0
1978
5.050
1.0
8.1
17,700
17,700
84.6
83.8
1979
5.080
1.05
8.1
22,900
22,900
90.0
87.3
1980
5.080
1.05
8.1
25,900
25,900
91.2
88.9
1981
5.350
1.3
9.3
29,700
29,700
92.4
89.2
1982
5.400
1.3
9.35
32,400
32,400
92.9
90.0
1983
5.400
1.3
9.35
35,700
35,700
93.7
90.0
1984
5.700
1.3
14.0
37,800
37,800
93.6
89.3
1985
5.700
1.35
14.1
39,600
39,600
93.5
88.9
1986
5.700
1.45
14.3
42,000
42,000
93.8
88.6
1987
5.700
1.45
14.3
43,800
43,800
93.9
87.6
1988
6.060
1.45
15.02
45,000
45,000
93.5
85.8
1989
6.060
1.45
15.02
48,000
48,000
93.8
86.8
1990
6.200
1.45
15.3
51,300
51,300
94.3
87.2
1991
6.200
1.45
15.3
53,400
125,000
94.4
87.8
1992
6.200
1.45
15.3
55,500
130,200
94.3
86.8
1993
6.200
1.45
15.3
57,600
135,000
94.4
87.2
1994
6.200
1.45
15.3
60,600
b
94.6
87.1
1995
6.200
1.45
15.3
61,200
b
94.2
85.8
1996
6.200
1.45
15.3
62,700
b
93.9
85.7
1997
6.200
1.45
15.3
65,400
b
93.8
85.1
1998
6.200
1.45
15.3
68,400
b
93.7
84.5
1999
6.200
1.45
15.3
72,600
b
93.9
83.9
2000
6.200
1.45
15.3
76,200
b
93.8
83.2
2001
6.200
1.45
15.3
80,400
b
94.0
84.7
2002
6.200
1.45
15.3
84,900
b
94.6
86.1
2003
6.200
1.45
15.3
87,000
b
94.5
85.9
2004
6.200
1.45
15.3
87,900
b
94.1
84.8
2005
6.200
1.45
15.3
90,000
b
93.9
84.1
2006
6.200
1.45
15.3
94,200
b
94.0
83.4
2007
6.200
1.45
15.3
97,500
b
93.9
82.6
2008
6.200
1.45
15.3
102,000
b
94.0
83.6
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Maximum Taxable

Tax Rates
Earnings
Percentage of
Self-employed
Workers with
Covered
(Social
Earnings
Earnings
Social
Security and
Social
Below Social
Below Social
Year
Securitya
HIa
HI combined)
Security
HI
Security Base Security Base
2009
6.200
1.45
15.3
106,800
b
94.5
85.2
2010
6.200
1.45
15.3
106,800
b
94.3
84.1
2011
6.200
1.45
15.3
106,800
b
93.8
83.6
2012
6.200
1.45
15.3
110,100
b
93.9
82.8
2013
6.200
1.45
15.3
113,700
b
94.0
83.6
2014
6.200
1.45
15.3
117,000
b
94.0
83.2
2015
6.200
1.45
15.3
118,500
b
93.7c
82.9c
2016
6.200
1.45
15.3
118,500
b
93.5c
83.1c
2017
6.200
1.45
15.3
127,200
b
94.1c
83.5c
2018
6.200
1.45
15.3
128,400
b
—
83.1c
2019
6.200
1.45
15.3
132,900
b
—
—
Source: Tables 2.A3 and 4.B1, Social Security Bul etin, Annual Statistical Supplement, 2019, at
https://www.ssa.gov/policy/docs/statcomps/supplement/2019/.
Notes: The original Social Security Act only included Old Age Insurance (OAI), coverage expanded to cover
dependents and survivors in 1940 (Old Age and Survivors Insurance, or OASI), and Disability Insurance (DI) was
created in 1957, leading to the combined Old Age, Survivors, and Disability Insurance (OASDI).
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. Upper limit on earnings subject to Hospital Insurance (HI) taxes was repealed by Omnibus Budget
Reconciliation Act (OBRA) 1993.
c. Estimates based on preliminary data.

Author Information

Zhe Li

Analyst in Social Policy

Acknowledgments
Former CRS analyst Debra B. Whitman authored an earlier version of the report. Former CRS analysts
Janemarie Mulvey and Wayne Liou made additional contributions.
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Social Security: Raising or Eliminating the Taxable Earnings Base

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