The Growth in Social Security Benefits Among the Retirement Age Population from Increases in the Cap on Covered Earnings

Alan Gustman (), Thomas L. Steinmeier and Nahid Tabatabai
Additional contact information
Thomas L. Steinmeier: Texas Tech University
Nahid Tabatabai: Dartmouth College

Working Papers from University of Michigan, Michigan Retirement Research Center

Abstract: This paper investigates how increases in the level of maximum earnings subject to the Social Security payroll tax have affected Social Security benefits and taxes. The analysis uses data from the Health and Retirement Study to ask how different the present value of own benefits and taxes would be for the cohort born from 1948 to 1953 (ages 51 to 56 in 2004) if they faced the lower cap on the payroll tax that faced those born 12 and 24 years earlier, but otherwise had the same earnings stream and faced the same benefit formula. We find that for those in the Early Boomer cohort of the Health and Retirement Study, ages 51 to 56 in 2004, that after adjusting for nominal wage growth, benefits were increased by 1.5 percent by the increase in the payroll tax ceiling compared to the cohort 12 years older, and by 3.7 percent over the benefits under the payroll tax ceiling for the cohort 24 years older. Tax receipts were increased by 5.3 and 10.6 percent over tax receipts that would have been collected under the tax ceilings that applied to the cohorts 12 and 24 years older respectively. About 22 percent of the additional tax revenues created by the increase in the payroll tax cap between the Early Boomer cohort and those 12 years older led to increased benefits. Similarly, about 27 percent of the additional tax revenues created by the increase in the payroll tax cap between the Early Boomer cohort and those 24 years older led to increase benefits. Results are also presented separately for men and women, for those in the top quartile of earners, and for those at the tax ceiling throughout their work lives.

Pages: 35 pages
Date: 2010-09
New Economics Papers: this item is included in nep-age and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://mrdrc.isr.umich.edu/publications/Papers/pdf/wp227.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://mrdrc.isr.umich.edu/publications/Papers/pdf/wp227.pdf [301 Moved Permanently]--> https://mrdrc.isr.umich.edu/publications/Papers/pdf/wp227.pdf)

Related works:
Working Paper: The Growth in Social Security Benefits Among the Retirement Age Population from Increases in the Cap on Covered Earnings (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mrr:papers:wp227

Access Statistics for this paper

More papers in Working Papers from University of Michigan, Michigan Retirement Research Center P.O. Box 1248, Ann Arbor, MI 48104. Contact information at EDIRC.
Bibliographic data for series maintained by MRRC Administrator ().