IDEAS home Printed from https://ideas.repec.org/p/epo/papers/2014-07.html
   My bibliography  Save this paper

Scrapping the Social Security Payroll Tax Cap: Who Would Pay More?

Author

Listed:
  • Nicole Woo
  • Janelle Jones
  • John Schmitt

Abstract

There is currently $2.7 trillion in the Social Security Trust Fund, held in Treasury bonds. Since the program is currently taking in more revenues (taxes on payroll and benefits as well as interest on the bonds) than it is paying out, the Trust Fund will continue to grow to about $2.9 trillion. The Trust Fund was set up to help pre-fund the retirement of the baby boomer generation. In about 2033, these funds will be drawn down, so after that point, if no changes are made, beneficiaries would receive about 75 percent of scheduled benefits. This gap between what the program would be able to pay and scheduled benefits is equivalent to about one percent of Gross Domestic Product over the next 75 years. To help avoid a reduction in payments and alleviate the program’s budget shortfall, one option is raising – or even abolishing – the cap on the maximum amount of earnings that are subject to the Social Security payroll tax. In 2014, that cap is set at $117,000 per year (it is adjusted annually to keep up with inflation). This issue brief analyzes Census Bureau data from the most recently available American Community Survey to ascertain how many workers would be affected if the Social Security payroll tax cap were raised or phased out.

Suggested Citation

  • Nicole Woo & Janelle Jones & John Schmitt, 2014. "Scrapping the Social Security Payroll Tax Cap: Who Would Pay More?," CEPR Reports and Issue Briefs 2014-07, Center for Economic and Policy Research (CEPR).
  • Handle: RePEc:epo:papers:2014-07
    as

    Download full text from publisher

    File URL: http://www.cepr.net/documents/ss-cap-update-2014-04.pdf
    Download Restriction: no

    More about this item

    Keywords

    CPI; social security; social security cap; inequality; payroll tax cap;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:epo:papers:2014-07. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/ceprdus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.