Social Security: Raising or Eliminating the Taxable Earnings Base




Social Security: Raising or Eliminating the
Taxable Earnings Base

Updated December 22, 2021
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
2022, this maximum—formally called the contribution and benefit base, and commonly referred
to as the taxable earnings base or the taxable maximum—is $147,000. 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 83% in 2020.
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 nearly 20% of the long-range shortfall in Social Security. OCACT’s estimates
also show that if all 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 about 35 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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Contents
Introduction ..................................................................................................................................... 1
Workers with Earnings Above the Taxable Earnings Base .............................................................. 2
Origin and History of the Taxable Earnings Base ........................................................................... 3
The Taxable Earnings Base Over Time ........................................................................................... 5
The Future of the Taxable Earnings Base ........................................................................................ 7
Projections of the Share of the Population Who Have Earned Above the Taxable
Earnings Base at Least Once in Their Lifetime ..................................................................... 7
Impact of Raising or Eliminating the Taxable Earnings Base ......................................................... 8
Impact on Individuals’ Payroll Taxes ........................................................................................ 9
Impact on Individuals’ Social Security Benefits ...................................................................... 11
Changes by Income Group ................................................................................................ 12
Changes by Age ................................................................................................................ 13
Changes by Race/Ethnicity ............................................................................................... 14
Impact on the Social Security Trust Funds .............................................................................. 15
Option 1A-1C: Eliminate Taxable Earnings Base Immediately ....................................... 18
Options 1D-1F: Eliminate Taxable Earnings Base Gradually .......................................... 19
Option 2: Taxes on Earnings Above a Certain Threshold Until the Taxable
Earnings Base is Eliminated .......................................................................................... 20
Options 3 and 4: Increase Taxable Earnings Base to Cover 90% of Earnings .................. 20
Taxes for Earnings Above the Taxable Earnings Base ...................................................... 21
Impact on Federal Revenue ..................................................................................................... 21
Impact on Workers’ and Employers’ Behavior ........................................................................ 22
Arguments For and Against Raising or Eliminating the Base ....................................................... 23
Arguments For ........................................................................................................................ 23
Arguments Against .................................................................................................................. 24

Figures
Figure 1. Percentage of Earnings and Workers Below the Taxable Earnings Base, 1950-
2020 .............................................................................................................................................. 6
Figure 2. Covered Workers Projected to Earn Above the Taxable Earnings Base in at
Least One Year During Worker’s Career ...................................................................................... 8
Figure 3. Projected Percentage of Current-Law Social Security Taxpayers Aged 31 and
Older with a Tax Increase in 2030 Under a Proposal to Eliminate the Taxable Earnings
Base in 2022 ................................................................................................................................ 11

Figure 4. Projected Percentage of Current-Law Beneficiaries Aged 60 and Older with a
Benefit Increase Under a Proposal to Eliminate the Taxable Earnings Base in 2022, by
Household Income Quintile........................................................................................................ 13

Figure 5. Projected Percentage of Current-Law Beneficiaries Aged 60 and Older with a
Benefit Increase Under a Proposal to Eliminate the Taxable Earnings Base in 2022, by
Age ............................................................................................................................................. 14

Figure 6. Projected Percentage of Current-Law Beneficiaries Aged 60 and Older with a
Benefit Increase Under a Proposal to Eliminate the Taxable Earnings Base in 2022, by
Race/Ethnicity ............................................................................................................................ 15

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Tables
Table 1. 2022 Social Security and Medicare Tax Rates and Maximum Taxable Earnings,
Maximum Taxes Paid, and Maximum Retirement Benefits ......................................................... 2
Table 2. Number and Percentage of Workers with Earnings Above the Taxable Earnings
Base of $132,900 by Type of Earnings and Sex, 2019 ................................................................. 3
Table 3. Impact on the Social Security Trust Funds of Raising or Eliminating the Social
Security Taxable Earnings Base ................................................................................................. 17
Table 4. Effect on the Deficit: Increasing the Maximum Taxable Earnings for the Social
Security Payroll Tax ................................................................................................................... 22

Table A-1. Social Security and Medicare Tax Rates and Taxable Earnings Bases, 1937-
2022 ............................................................................................................................................ 26

Appendixes
Appendix. Taxable Earnings Bases: Detailed Table ...................................................................... 26

Contacts
Author Information ........................................................................................................................ 28


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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 2021, an
estimated 176 million 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
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 $147,000 in 2022
(see Table 1). The HI tax is levied on all 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 beneficiaries, 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 million, pay the same dollar amount in Social
Security payroll taxes. Under the 2022 limit of $147,000, the maximum amount a wage and
salary worker directly contributes to Social Security is $9,114 (the worker’s employer contributes
an equal amount), whereas a self-employed individual contributes a maximum of $18,228.4
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 2022 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 maximum (or tax max).
2 Social Security Administration (SSA), Office of the Chief Actuary, Social Security Program Fact Sheet for 2021,
available at https://www.ssa.gov/OACT/FACTS/fs2021_06.pdf. Some workers (approximately 6%) 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 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 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). Thus, the reference year used for the 2017 taxable earnings base
was 2013, not 2014. There was also no increase in the base from 2009 to 2010 and from 2010 to 2011 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 Adjustments
.
4 Maximum Social Security contribution calculation: $147,000 x 6.2% = $9,114.00 and $147,000 x 12.4% =
$18,228.00.
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retirement age,5 his or her annual benefit would be $40,140 ($3,345 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. 2022 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 rateb
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
$147,000
no
maximum
Employee/Employer (each), Maximum Taxes Paid
$9,114
No limit
Self-employed, Maximum Taxes Paid
$18,228
No limit
Maximum Social Security Benefit
Monthly
Annual
Retired at full retirement age in 2022c
$3,345
$40,140
Source: Social Security Administration (SSA), “Social Security Fact Sheet: 2022 Social Security Changes,” at
https://www.ssa.gov/news/press/factsheets/colafacts2022.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. 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.
c. Monthly benefits are reduced if a worker claims benefits before his or her full retirement age; a worker
receives credits that increase his or her monthly benefits if he or she claims benefits after full retirement
age.
Workers with Earnings Above the Taxable Earnings
Base
According to the SSA’s statistics, a small share of workers earn above the taxable earnings base
each year. In 2019, about 6.2% of workers (10.9 million individuals) earned more than the taxable

5 The 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 retirement 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 Computed: In Brief
.
6 Social Security Administration, “Fact Sheet: 2022 Social Security Changes,” at https://www.ssa.gov/news/press/
factsheets/colafacts2022.pdf.
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earnings base (Table 2). Most of the individuals earning above the base were men (7.9 million
individuals, or roughly 72.3% of the total). Approximately 8.7% of all male workers and 3.6% of
all female workers had earnings above the maximum. Most individuals with earnings above the
base were wage and salary workers (roughly 95.0% of the total). Some 6.6% of individuals who
earned above the base were self-employed. A relatively small group of workers who earned above
the base (174,000 individuals or 1.6% 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 $132,900 by Type of Earnings and Sex, 2019
Percentage of Workers with
Number of Workersa
Earnings Above Taxable

(in thousands)
Earnings Base among ...
Total Workers
Total
with Earnings
with Earnings
Workers
Above the Taxable
Above Taxable
with Any
Group
Total
Earnings Base
Earnings Base
Earnings
All workers
176,847
10,949
100.0%
6.2%
Men
91,033
7,920
72.3%
8.7%
Women
85,814
3,089
28.2%
3.6%
Wage and salary
165,694
10,403
95.0%
6.3%
workers
Men
84,731
7,457
68.1%
8.8%
Women
80,963
2,946
26.9%
3.6%
Self-employed
19,896
720
6.6%
3.6%
Men
10,804
552
5.0%
5.1%
Women
9,092
168
1.5%
1.8%
Waged/salaried and
8,743
174
1.6%
2.0%
self-employed
Source: Social Security Bulletin, Annual Statistical Supplement, 2021, at https://www.ssa.gov/policy/docs/
statcomps/supplement/2020/index.html. Congressional Research Service (CRS) calculations based on 2019
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.
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 bill
that President Roosevelt sent to Congress 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

7 SSA, Annual Statistical Supplement, 2021, tables 4.B1, 4.B3, 4.B4, 4.B7, and 4.B9, at https://www.ssa.gov/policy/
docs/statcomps/supplement/2020/4b.html.
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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 bill reported by the House Ways and Means Committee that clearly
established a maximum taxable amount, which the bill 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 well-to-
do recipients, would not erode over time, thereby preserving their support for the system.10 Critics
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 specifically 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

8 Prior to the enactment of the 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 The 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.
11 For example, see “Reports of the 1979 Advisory Council on Social Security,” Social Security Bulletin, vol. 43, no. 2
(February 1980), p. 4.
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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
eventually become the Social Security Amendments of 1972; P.L. 92-603) gained traction. The
bill 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 automatically 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) gradually 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 all 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 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. 101-508) 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; 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 will not be discussed further in this report.
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 periodically by Congress, which contributed to its dramatic

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 Amendments 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 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.
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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,
1950-2020
shaded bars indicate years in which recessions occurred

Sources: Figure prepared by the Congressional Research Service (CRS) based on data from Social Security
Administration, Annual Statistical Supplement, 2021, 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 fallen
from 90% of all earnings in 1982 to 83% in 2000, and it has fluctuated with the business cycle
since then (rising during economic recessions and falling 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
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

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, The 2021 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal
Disability Insurance Trust Funds, p. 150, at https://www.ssa.gov/oact/tr/2021/tr2021.pdf. Estimates are based on
assumptions in 2021 trustees report.
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 2019. 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. 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/
TR05/tr05.pdf.
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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 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 (see “The Taxable Earnings Base Over Time”). Under the intermediate assumptions in the
2021 Trustees Report, the percentage of covered earnings that is taxable is assumed to decline to
82.5% for 2030,20 and the levels will remain stable thereafter.21
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 fall 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 will 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 2018, 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) will 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
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.

20 The Trustees 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. The board of trustees is composed of
the Secretary of the Treasury, the Secretary of Labor, the Secretary of Health and Human Services, the Commissioner
of Social Security, and two public trustees. The report makes demographic and economic assumptions to project trust
fund solvency. To generate a range of possibilities, there are three sets of assumptions: low-, intermediate-, and high-
cost. The low-cost set of assumptions is meant to show a scenario that is favorable for the program’s financial status.
The 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 Trustees Reports, including the Trustees Reports’ primary text, use the intermediate
assumptions.
21 SSA, The 2021Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal
Disability Insurance Trust Funds, pp. 150, 193, at https://www.ssa.gov/OACT/TR/2021/tr2021.pdf.
22 Social Security Administration, Annual Statistical Supplement, 2020, Table 4.B1.
23 The Social Security Administration’s Office of Retirement Policy, “Population Profiles: Taxable Maximum
Earners,” released August 2021, at https://www.ssa.gov/policy/docs/population-profiles/tax-max-earners.html.
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Social Security: Raising or Eliminating the Taxable Earnings Base

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,
released August 2021, 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.
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

24 There 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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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 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 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’ Payroll Taxes
SSA’s Office of Research, Evaluation and Statistics provides projections, using the Modeling
Income in the Near Term Version 8 (MINT8),25 of the impact of raising or eliminating the taxable
earnings base on Social Security payroll taxes paid in 2030, 2050, 2070. 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 2021 to 2030. The estimates for eliminating the taxable earnings base are based on the
removal of the taxable earnings base in 2022. The population for the estimation includes current-
law payroll taxpayers aged 31 and older.26
Figure 3 displays the percentage of current-law Social Security taxpayers aged 31 and older in
2030 who would pay more in payroll taxes under a proposal to eliminate the taxable earnings
base in 2022 by demographic and socioeconomic characteristics. About 8% of taxpayers are
projected to pay more payroll taxes if the taxable earnings base were eliminated. Typically, those
individuals are high-wage earners and are also the ones who would pay more taxes if the taxable
earnings base were raised to count 90% of earnings in payroll tax. This percentage stays relatively
stable over time under SSA’s estimation.27

25 The Modeling Income in the Near Term, Version 8 (MINT8) is a microsimulation model that utilizes Social Security
administrative records matched 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 2019 Trustees
Report. For more information on the MINT8 model, see the Office of Retirement Policy’s description of the model at
https://www.ssa.gov/policy/docs/projections/methodology.htmland Urban Institute’s primer at https://www.urban.org/
research/publication/modeling-income-near-term-8-and-2014-primer.
26 The 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 of individuals aged 62 and older
through 2065 in 10-year increments. The changes include increasing the taxable earnings base to $150,000 over a two-
year period, increasing the taxable earnings base to $180,000 over a two-year period, and increasing the taxable
earnings base to cover 90% of payroll over a 10-year period. All changes begin in 2016. These 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….
These transitions are based on probabilities generated by carefully calibrated equations estimated from nationally
representative household survey data” (DYNASIM: Projecting American’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.
27 SSA, Office of Research, Evaluation, and Statistics, “Projected Effects of a Proposal to Count All Earnings in Payroll
Tax and Benefit Calculations,” (run on) June 30, 2021, Tab Social Security Taxes Paid, at https://www.ssa.gov/policy/
docs/projections/policy-options/count-all-earnings.html, and “Projected Effects of a Proposal to Count 90% of Earnings
in Payroll Tax and Benefit Calculations; Phase in 2021-2030,” (run on) June 30, 2021, Tab Social Security Taxes Paid,
at https://www.ssa.gov/policy/docs/projections/policy-options/count-90-percent-of-earnings.html.
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Individuals who are projected to pay more in payroll taxes under the elimination of the taxable
earnings base vary by socioeconomic characteristics, generally reflecting the share of people with
each characteristic who are projected to earn above the current-law taxable earnings base. For
example, 5% of women are projected to pay more payroll taxes if the taxable earnings base were
eliminated, compared to 10% of men; 5% of individuals identified as non-Hispanic Black or
African American and 4% of Hispanics or Latinos are projected to face a tax increase, compared
to 8% for the non-Hispanic Whites and 16% for all other non-Hispanic races; about 7%-11% of
population under age 60 are projected to pay more Social Security taxes under the elimination of
the taxable earnings base, compared to 4% or less for those aged 60 and older; 3% of widowed
individuals are projected to pay more taxes, compared to 7%-8% for married, divorced, or never-
married. Additionally, a substantially larger percentage of individuals with a relatively higher
educational level or more household income are projected to pay more Social Security taxes
should the taxable earnings base be eliminated.
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Figure 3. Projected Percentage of Current-Law Social Security Taxpayers Aged 31
and Older with a Tax Increase in 2030 Under a Proposal to Eliminate the Taxable
Earnings Base in 2022

Source: SSA, Office of Research, Evaluation, and Statistics, “Projected Effects of a Proposal to Count All
Earnings in Payroll Tax and Benefit Calculations,” (run on) June 30, 2021, at https://www.ssa.gov/policy/docs/
projections/policy-options/count-all-earnings.html.
Note: NH refers to non-Hispanic.
Impact on Individuals’ Social Security Benefits
For the same proposals of raising or eliminating the taxable earnings base discussed above, SSA’s
Office of Research, Evaluation and Statistics also estimated the impact on Social Security
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benefits in 2030, 2050, and 2070.28 Because earnings above the current taxable earnings base are
included in the benefit computations, workers who are expected to pay more Social Security taxes
would generally receive a higher benefit in retirement (not accounting for other adjustments).
Under Social Security program rules, 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 and disabled worker benefits represent nearly three-quarters
of the affected beneficiaries; spouse and widow(er) benefits make up more than a quarter of the
affected beneficiaries.29
Based on the projections, if the taxable earnings base were eliminated and all earnings were
subject to the Social Security payroll tax, 2% of all beneficiaries would receive a higher benefit
amount in 2030 (less than 10 years after the elimination of the taxable earnings base). As more
affected workers become eligible for Social Security over time, the percentage of beneficiaries
affected would increase to 13% in 2050 and 19% in 2070.30 Phasing in the increase to the taxable
earnings base to make 90% of covered earnings subject to the payroll tax leads to similar results
in the percentage of all beneficiaries receiving a higher benefit.31
The discussion of the impact on beneficiaries by group uses 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 2021 to 2030, 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.32
Changes by Income Group
Figure 4 shows that the impact of eliminating the taxable earnings base immediately on future
beneficiaries varies significantly by income group (household income quintiles).33 Few
beneficiaries in the lowest quintile would see an increase in benefits in 2030, compared with 8%
of beneficiaries in the highest quintile who would gain increased benefits if the taxable earnings

28 For examples of alternative projections, see footnote 26.
29 SSA, Office of Research, Evaluation, and Statistics, “Projected Effects of a Proposal to Count All Earnings in Payroll
Tax and Benefit Calculations,” (run on) June 30, 2021, Tab Social Security Benefits, at https://www.ssa.gov/policy/
docs/projections/policy-options/count-all-earnings.html, and “Projected Effects of a Proposal to Count 90% of Earnings
in Payroll Tax and Benefit Calculations; Phase in 2021-2030,” (run on) June 30, 2021, Tab Social Security Benefits, at
https://www.ssa.gov/policy/docs/projections/policy-options/count-90-percent-of-earnings.html.
30 SSA, Office of Research, Evaluation, and Statistics, “Projected Effects of a Proposal to Count All Earnings in Payroll
Tax and Benefit Calculations,” (run on) June 30, 2021, Tab Social Security Benefits, at https://www.ssa.gov/policy/
docs/projections/policy-options/count-all-earnings.html.
31 SSA, Office of Research, Evaluation, and Statistics, “Projected Effects of a Proposal to Count 90% of Earnings in
Payroll Tax and Benefit Calculations; Phase in 2021-2030,” (run on) June 30, 2021, Tab Social Security Benefits, at
https://www.ssa.gov/policy/docs/projections/policy-options/count-90-percent-of-earnings.html.
32 The 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.
33 Income groups are defined using annual household income for the year of the projection (2030, 2050, and 2070) after
an individual claims disability, retirement, survivor, or spousal benefits. Households are divided into five groups
(quintiles) based on their household 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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base were eliminated. The percentage of beneficiaries affected by eliminating the taxable earnings
base would increase substantially in 2050 as more affected workers become eligible for Social
Security benefits. By 2070, about half of the beneficiaries in the highest quintile would have an
increase in benefits if the taxable earnings base was removed.
Figure 4. Projected Percentage of Current-Law Beneficiaries Aged 60 and Older with
a Benefit Increase Under a Proposal to Eliminate the Taxable Earnings Base in 2022,
by Household Income Quintile

Sources: SSA, Office of Research, Evaluation, and Statistics, “Projected Effects of a Proposal to Count All
Earnings in Payroll Tax and Benefit Calculations,” (run on) June 30, 2021, Tab Social Security Benefits, at
https://www.ssa.gov/policy/docs/projections/policy-options/count-all-earnings.html.
Notes: Income groups are defined using annual household 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.
Changes by Age
Figure 5 shows the percentage of current-law beneficiaries aged 60 and older affected, by age,
under the immediate elimination of the taxable earnings base. In 2030, very few people aged 80
and older would have higher benefits if the taxable earnings base had been eliminated in 2022.
These workers would have been over 72 years old in 2022, 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.
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Figure 5. Projected Percentage of Current-Law Beneficiaries Aged 60 and Older with
a Benefit Increase Under a Proposal to Eliminate the Taxable Earnings Base in 2022,
by Age

Sources: SSA, Office of Research, Evaluation, and Statistics; Table 1, from https://www.ssa.gov/policy/docs/
projections/policy-options/count-all-earnings.html, retrieved on December 6, 2021.
Note: Beneficiaries must receive a greater than 1% difference in benefits in order to be considered affected.
Changes by Race/Ethnicity
Figure 6 shows the percentage of current-law beneficiaries aged 60 and older with a benefit
increase under the elimination of the taxable earnings base in 2022, by race/ethnicity in 2030,
2050, and 2070. In each year of the analysis, a larger percentage of individuals identified as all
other non-Hispanic races and non-Hispanic White would receive a higher benefit than those
identified as Hispanic or Latino (any race) and non-Hispanic Black or African American. This
result is due to the larger percentage of all other non-Hispanic races and non-Hispanic Whites that
earn more than the current taxable maximum base compared to Hispanic or Latino (any race) and
non-Hispanic Black or African American (see Figure 3). SSA estimates that about 34% of all
other non-Hispanic races and 21% of non-Hispanic Whites would receive a higher benefit in 2070
if the taxable earning base were eliminated.
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Figure 6. Projected Percentage of Current-Law Beneficiaries Aged 60 and Older with
a Benefit Increase Under a Proposal to Eliminate the Taxable Earnings Base in 2022,
by Race/Ethnicity

Sources: SSA, Office of Research, Evaluation, and Statistics; Table 1 from https://www.ssa.gov/policy/docs/
projections/policy-options/count-all-earnings.html, retrieved on December 6, 2021.
Note: Beneficiaries must receive a greater than 1% difference in benefits in order to be considered affected.
Impact on the Social Security Trust Funds
The 2021 Trustees Report projects that without any changes to current law, the OASDI trust funds
would be depleted (i.e., the trust fund will have a balance of zero) in 2034.34 Under the
intermediate assumptions of the 2021 Trustees Report, SSA actuaries calculate that it would take
an immediate and permanent 3.36% increase in the payroll tax rate (from 12.40% to 15.76%) to
achieve solvency over the next 75 years.35 The actuaries have estimated the impact on the trust
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

34 SSA, The 2021 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/2021/tr2021.pdf. Estimates are based on intermediate
assumptions in 2021 trustees report.
35 In 2021, the Social Security trustees project that the 75-year actuarial deficit for the trust funds is equal to 3.54% of
taxable payroll. Stated a different way, the trustees point out that an immediate 3.36-percentage-point increase in the
payroll tax rate (from 12.40% to 15.76%) would be needed for the trust funds to remain solvent throughout the 75-year
projection period. The necessary tax rate increase of 3.36% differs from the 3.54% 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.
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earnings above the current taxable earnings base can be (1) credited the same as the earnings
below the current taxable earnings base; (2) still counted toward benefits, but at a reduced rate; or
(3) not credited at all.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 shortfall eliminated with the
proposal and the remaining 75-year shortfall as a percentage of taxable payroll (i.e., the
percentage that the payroll tax rate would have to be raised for the system to be solvent over the
next 75 years after accounting for the proposal). Taxable payroll is the total amount of earnings in
the economy that is subject to the Social Security payroll tax (with some adjustments). 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
illustrates how contributions and benefits interact to affect the long-range shortfall. A brief
discussion on the impact of applying a payroll tax above the current taxable earnings base is
included below.

37 Benefits are calculated by taking a worker’s summary of lifetime covered (payroll taxed) earnings called the average
indexed monthly 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 primary insurance amount (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 Computed: In Brief.
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Social Security: Raising or Eliminating the Taxable Earnings Base

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 2021 Trustees Report Intermediate

3.54a
Assumptions
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%
0.96
1B
Credit to benefits (current benefit formula)
57%
1.54
1C
Adjusted benefits (new benefit formula)b
66%
1.20
1D
Phased in 2022-2028 (new benefit formula)c
68%
1.15
1E
Phased in 2023-2027 (new benefit formula)d
65%
1.26
1F
Phased in 2024-2033 (new benefit formula)b
59%
1.45
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 2022 (retain cap for benefit calculations)
70%
1.07
2B
$400,000 beginning in 2023 (new benefit formula)e
61%
1.40
2C
$250,000 beginning in 2023 (new benefit formula)e
67%
1.17
2D
$300,000 beginning in 2023 (new benefit formula)f
64%
1.28
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
2022-2031), with...

3A
No credit to benefits (retain cap for benefit calculations)
30%
2.49
3B
Credit to benefits (current benefit formula)
22%
2.77
3C
Phased in 2023-2028 with adjusted benefits (new benefit formula)g
29%
2.52
3D
Phased in 2022-2031 and apply 6.2% tax rate for earnings above the
revised taxable maximum, credit to benefits up to revised taxable
41%
2.10
maximum
4. Increase the taxable maximum by 2% each year until reach 90% of covered earnings, with...
4A
No credit to benefits beginning in 2024 (retain cap for benefit
23%
2.73
calculations)
4B
Credit to benefits beginning in 2022 (current benefit formula)
18%
2.89
4C
Adjusted benefits beginning in 2023 (new benefit formula)h
19%
2.87
4D
For employee only, while eliminating taxable maximum for employer
42%
2.05
beginning in 2022 (current benefit formula using revised tax
maximum)
Sources: SSA’s Office of the Chief Actuary, Solvency Provisions: Payroll Taxes, at https://www.ssa.gov/OACT/
solvency/provisions/payrolltax.html, as retrieved in December 2021. Options listed in this table include (in order
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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.
Notes: Projections based on intermediate assumptions of 2021 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.
a. In 2021, the Social Security trustees project that the 75-year actuarial deficit for the trust funds is equal to
3.54% of taxable payroll. Stated a different way, the trustees point out that an immediate 3.36-percentage-
point increase in the payroll tax rate (from 12.40% to 15.76%) would be needed for the trust funds to
remain solvent throughout the 75-year projection period. The necessary tax rate increase of 3.36% differs
from the 3.54% 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.
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 payroll
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; (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 payroll
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 payroll
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 payroll
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 payroll
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 SSA’s Office of the Chief Actuary analyzed several proposals that involve eliminating the
taxable earnings base immediately, so that all earnings are taxed; these proposals differ based on
how benefits are calculated to take into account earnings above the current taxable earnings base.
In these proposals, the trust fund depletion date is pushed back by about 20-26 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 increased revenue would
eliminate 73% of the projected shortfall and the program would have a projected shortfall equal
to about 0.96% of taxable payroll. Under this scenario, the payroll tax rate would need to be
increased from 12.40% to about 13.36% or other policy changes would have to be made for the

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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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 all wages counted toward benefits as they are now,39 the trust fund would be depleted in 2054;
57% of the projected financial shortfall 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
about 1.54% in total payroll tax rate (from 12.40% to 13.94%) or other policy changes would
have to be made to cover the shortfall. 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 still positive, as $6 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 the 2022 annual maximum
(if claimed at full retirement age) of $40,140. To contextualize how benefits are affected by the
increase in contributions, authors Reno and Lavery estimate that, in 2005, 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 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%.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 generally 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 average
indexed monthly earnings (AIME)41 above this new bend point extends the year of trust fund
depletion to 2056.42 This proposal eliminates 66% of the projected shortfall, and the payroll tax
would need to increase from 12.40% to about 13.60% 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 gradually eliminating the taxable earnings base so full elimination takes
place sometime between 2027 and 2033. These proposals were usually accompanied with a
secondary Social Security benefit formula.43 This secondary formula generally involves a new
term called 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, a new bend point is created together with this secondary formula. These proposals
generally increase the long-term revenue of Social Security trust funds and would eliminate about
59%-68% of the projected 75-year shortfall. The payroll tax rate would need to be increased from

39 This 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. The 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 See footnote 37.
42 This proposal can be found in Reno and Lavery, Fixing Social Security.
43 Examples of option 1D include the Protecting and Preserving Social Security Act (H.R. 2302 and S. 1132 in the 116th
Congress). Option 1E was included in the Strengthening Social Security Act (H.R. 4921 in the 117th Congress). Option
1F refers to the Social Security Enhancement and Protection Act (H.R. 5050 in the 117th Congress).
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the current 12.40% to about 13.55%-13.85%, 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 all 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 called 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.44 These proposals would have a budgetary effect of eliminating 61%-70% of
the projected financial shortfall and requiring an increase of about 1.07%-1.40% in the payroll
tax, or other policy changes would have to be made to eliminate the shortfall for the next 75
years. Some of these proposals delay the date of trust fund depletion by about eight to 20 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 generally 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%-30% of the projected
long-range shortfall, requiring an increase of about 2.49%-2.77% in the payroll tax, or other
policy changes would have to be made to eliminate the shortfall for the next 75 years.45 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 41% of the 75-year financial shortfall and the
program would have a remaining projected shortfall equal to 2.10% of taxable payroll.
Phasing in the increase by raising the taxable earnings base by an additional 2% a year will cover
approximately 18%-23% of the shortfall (Option 4A-4C).46 In these cases, paying higher benefits
on the additional covered earnings does little to change the fund depletion date. An alternative

44 Examples of this proposal include the Social Security Expansion Act (H.R. 5723 and S. 3071 in the 117th Congress),
proposing a payroll tax on earnings above $250,000 and retaining the cap for benefit calculations; the Save Social
Security Act (H.R. 2304 in the 117th Congress), proposing a payroll tax on earnings above $400,000 and a formula
factor of 3% on AIME+; the Social Security for Future Generations Act (H.R. 5737 in the 117th 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), proposing a payroll tax on earnings above $400,000 and a formula factor of 2%
on AIME+.
45 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).
46 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 Task Force, Restoring America’s Future, November 2010;
and a proposal by the National Commission on Fiscal Responsibility and Reform, The Moment of Truth: Report of the
National Commission on Fiscal Responsibility and Reform
, December 2010.
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option proposed increasing (phased in) the taxable earnings base to 90% of covered earnings only
to employees,47 but eliminating taxable maximum for employers. Applying the current benefit
formula to the revised taxable maximum for employees, the provision could eliminate 42% of the
projected long-range shortfall and the payroll tax rate would need to be increased from 12.40% to
about 14.45%, 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.48 This is similar to eliminating the taxable earnings base, but reducing the
payroll tax rate workers have to pay on those higher earnings. Proposals generally have tax rates
between 2% and 3%, with some proposals allowing 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 shortfall.49
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.50 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 generally 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 (see Table
4
)
. JCT and the Congressional Budget Office (CBO) estimated that raising the wage base to cover
90% of earnings would generate $277.9 billion in additional revenue over the five-year budget
window (FY2021-FY2025) and $661.8 billion over the 10-year window (FY2021-FY2030).51
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 individual income tax revenues,
which would be on-budget.52 The reduction in income tax revenue is due to the decrease in after-

47 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.
48 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.
49 See SSA’s Office of the Chief Actuary, “Solvency Provisions: Payroll Taxes,” E2.6 and E2.8, at
https://www.ssa.gov/OACT/solvency/provisions/payrolltax.html.
50 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.
51 Staff of the Joint Committee on Taxation and Congressional Budget Office (CBO), “Increase the Maximum Taxable
Earnings for the Social Security Payroll Tax,” December 2020, at http://www.cbo.gov/budget-options/56862.
52 From 1935 to 1968 and since 1986, the Social Security program has been off-budget. The program is self-financing,
and the Social Security trust funds are displayed separately in the federal budget. This 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 of Congress). The program can be and has
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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 $15.1billion over the 10-year period, and would be classified as off-budget.
JCT and CBO also estimated that subjecting earnings greater than $250,000 to payroll tax in
addition to current-law taxable earnings base would generate $411.1 billion in additional revenue
over the five-year budget window (FY2021-FY2025) and $1,024.0 billion over the 10-year
window (FY2021- FY2030). The option assumes the earnings greater than $250,000 would not
be included in the Social Security benefit calculation (i.e., benefits are based on the current
taxable earnings base), thus not affecting program outlays.
Table 4. Effect on the Deficit: Increasing the Maximum Taxable Earnings for the
Social Security Payroll Tax
(in billions of dollars)
2021-
2021-
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

2025
2030
Option I: Raise Taxable Share to 90% of Covered Earnings
Change in
0.1
0.2
0.4
0.7
1
1.4
1.9
2.4
3.1
3.8
2.5
15.1
outlays
Change in
18.5
61.1
65
65
68.3
71.1
73.9
77.2
79.7
82
277.9
661.8
revenues
Change in
-18.4
-60.9
-64.6
-64.3
-67.3
-69.7
-72
-74.8
-76.6
-78.2
-275.4 -646.7
the deficit
Option 2: Subject Earnings Greater Than $250,000 to Payroll Tax
Change in
26.6
88.9
93.6
98
104
109.5
115.1
122.5
129.4
136.5
411.1
1,024.0
revenues
Sources: Staff of the Joint Committee on Taxation and Congressional Budget Office (CBO), “Increase the
Maximum Taxable Earnings for the Social Security Payroll Tax,” December 2020, at http://www.cbo.gov/budget-
options/56862.
Notes: Based on option taking effect in January 2021. All years referred to regarding budgetary spending and
revenues are federal fiscal years. Option 1 would raise the taxable earnings base such that the taxable share of
earnings from jobs covered by Social Security is 90%. The base would grow at the same rate as average wages, as
it does under current law. The additional taxed earnings would be included in the benefit calculation. Option 2
would apply payroll tax to earnings over $250,000 in addition to earnings below the current-law taxable earnings
base. The benefits are calculated based on earnings below the current-law taxable earnings base. The taxable
earnings base would continue to grow with average wages while the $250,000 would not change. The CBO
projects that the taxable earnings base would exceed $250,000 in 2039; after that, all earnings from jobs covered
by Social Security would be subject to the payroll tax.
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

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: The Social Security Trust Funds and the Federal Budget,”
available at https://www.ssa.gov/history/BudgetTreatment.html; and CRS In Focus IF11615, The Social Security Trust
Funds and the Budget
.
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estimates of the distributional and trust fund impacts, and only partially 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.53 However, the degree to which the work effort
will be reduced is a matter of debate; each worker would face a different choice between the
reduced earnings and the additional leisure time, based on the worker’s individual preferences.54
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.55
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 overall labor costs will 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.56 In 2022, 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 $147,000 in
earnings, someone earning $200,000 a year pays $9,114, or 4.6% 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
small group of the higher-earning workers in society.

53 U.S. Department of Treasury, 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.
54 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.
55 See Martin Sullivan, “Budget Magic and the Social Security Tax Cap,” Tax Notes, March 14, 2005.
56 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.
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Supporters argue that subjecting a larger percentage of earnings to the payroll tax would also
adjust for the higher life expectancies of high earners.57 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.58 The impact on the Social Security program is that
higher-earning individuals receive benefits for more years over their lifetimes, making the system
less progressive.59 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 called for broadening the sources of income that are taxed beyond earnings.60
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 still progressive based on
how they are calculated.61
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 $59,187 in 2022 for married workers with three or more
children (up to $22,610 for married workers without children).62 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.63

57 See Peter Diamond and Peter Orszag, Saving Social Security: A Balanced Approach, Brookings Institution, 2004.
58 See CRS Report R44846, The Growing Gap in Life Expectancy by Income: Recent Evidence and Implications for the
Social Security Retirement Age
, by Katelin P. Isaacs and Sharmila Choudhury.
59 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.
60 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.
61 CRS Report R43542, How Social Security Benefits Are Computed: In Brief.
62 For example, see Sen. Robert C. Byrd, “Revenue Act of 1978,” Senate debate, Congressional Record, vol. 124, part
25 (October 5, 1978), p. 33955; Internal Revenue Service, “Internal Revenue Bulletin: 2021-48,” November 29, 2021,
at https://www.irs.gov/irb/2021-48_IRB.
63 See D. Mark Wilson, A Look at Who Pays the Payroll Tax, The Heritage Foundation, August 30, 2001, at
http://www.heritage.org/research/reports/2001/08/a-look-at-who-pays-the-payroll-tax.
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Critics also argue that raising the cap will serve as a disincentive to work and could serve as a
drain on the economy.64 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
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 well off.

64 See D. Mark Wilson, Removing the Social Security’s Tax Cap on Wages Would Do More Harm Than Good, The
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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Appendix. Taxable Earnings Bases: Detailed Table
Table A-1. Social Security and Medicare Tax Rates and Taxable Earnings Bases,
1937-2022
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
93.7
82.9
2016
6.200
1.45
15.3
118,500
b
93.6
83.1
2017
6.200
1.45
15.3
127,200
b
94.1c
83.5c
2018
6.200
1.45
15.3
128,400
b
93.8c
83.3c
2019
6.200
1.45
15.3
132,900
b
93.8c
83.4c
2020
6.200
1.45
15.3
137,700
b

82.5c
2021
6.200
1.45
15.3
142,800
b


2022
6.200
1.45
15.3
147,000
b


Source: Tables 2.A3 and 4.B1, Social Security Bulletin, Annual Statistical Supplement, 2021, at
https://www.ssa.gov/policy/docs/statcomps/supplement/2021/index.html.
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

Congressional Research Service

28

Social Security: Raising or Eliminating the Taxable Earnings Base


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.

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
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Congressional Research Service
RL32896 · VERSION 26 · UPDATED
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