Raising the Social Security Payroll Tax Cap: How Many Workers Would Pay More?
AbstractOn January 1, the maximum amount of annual earnings subject to the Social Security tax – a.k.a. the payroll tax cap – increased to $113,700. Every year, this cap is adjusted to keep up with inflation. Many Americans are not aware that income above the cap is not taxed by Social Security. In other words, workers who make $113,700 or less per year pay a higher Social Security payroll tax rate than those who make more. To help alleviate Social Security’s long-term budget shortfall, raising – or even eliminating – the cap has gotten some attention from policy makers. This paper finds that just 1 in 20 workers -- the wealthiest -- would be affected if the cap were eliminated entirely, and only 1 in 75 would be affected if the cap were applied to earnings over $250,000. In addition, the share of workers who would pay more varies greatly according to gender, race, state and age.
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Bibliographic InfoPaper provided by Center for Economic and Policy Research (CEPR) in its series CEPR Reports and Issue Briefs with number 2013-02.
Length: 5 pages
Date of creation: Jan 2013
Date of revision:
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CPI; social security; social security cap; inequality; payroll tax cap;
Find related papers by JEL classification:
- H - Public Economics
- H5 - Public Economics - - National Government Expenditures and Related Policies
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
This paper has been announced in the following NEP Reports:
- NEP-AGE-2013-02-03 (Economics of Ageing)
- NEP-ALL-2013-02-03 (All new papers)
- NEP-PKE-2013-02-03 (Post Keynesian Economics)
- NEP-PUB-2013-02-03 (Public Finance)
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