Raising the Social Security Payroll Tax Cap: How Many Workers Would Pay More?

Nicole Woo, John Schmitt and Janelle Jones

CEPR Reports and Issue Briefs from Center for Economic and Policy Research (CEPR)

Abstract: On 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.

Keywords: CPI; social security; social security cap; inequality; payroll tax cap (search for similar items in EconPapers)
JEL-codes: H H2 H3 H5 H55 (search for similar items in EconPapers)
Pages: 5 pages
Date: 2013-01
New Economics Papers: this item is included in nep-age, nep-pke and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:epo:papers:2013-02

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