Social Security: Raising or Eliminating the Taxable Earnings Base

Social Security: Raising or Eliminating
the Taxable Earnings Base
Updated June 5, 2008
Janemarie Mulvey
Specialist in Aging Policy
Domestic Social Policy Division
Debra B. Whitman
Specialist in the Economics of Aging
Domestic Social Policy Division

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 2008, this maximum — or what is referred to as the taxable earnings
base — is $102,000. The taxable earnings base serves as both a cap on contributions
and a cap on benefits. As a contribution base, it establishes the maximum amount
of each 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. However, due to increasing earnings inequality,
the percentage of covered earnings that are taxable has decreased from 90% in 1982
to 85% in 2005. The percentage of covered earnings that is taxable is projected to
decline to about 83% for 2014 and later. Since the cap was indexed to the average
growth in wages, the share of the population below the cap has remained relatively
stable at roughly 94%. Of the 9.5 million Americans with earnings above the base,
roughly 80% are men and only 9% had any earnings from self-employment income.
The District of Columbia has the highest share of the population above the maximum
(12%) and South Dakota has the lowest share (2%).
CRS estimated the potential impact of eliminating the taxable wage base on
future benefits and taxes. If the base were removed in 2013, CRS estimates that by
2035, 21% of beneficiaries would have paid some additional payroll taxes over the
course of their lifetimes. However, the average change in taxes and benefits would
be small. Looking only at individuals who would pay any additional taxes over the
course of their lifetimes, at the median, total lifetime tax payments would rise by 3%
and benefits would increase by 2% relative to current law. In general, those in the
highest income groups would have the largest changes in both tax payments and in
benefits relative to current law.
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, if the
maximum taxable earnings amount had been raised in 2005 from $90,000 to
$150,000 — roughly the level needed to cover 90% of all earnings — it would have
eliminated roughly 40% of the long-range shortfall in Social Security. If all earnings
were subject to the payroll tax, but the base was retained for benefit calculations, the
Social Security Trust Funds would remain solvent for the next 75 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.
In the 110^th Congress, H.R. 5779 was introduced, which would require workers
and employers to each contribute 3% of earnings above the taxable wage base. Under
H.R. 5779, earnings above the taxable wage base would not be credited for benefit
computation purposes.
This report will be updated as legislative activity warrants.

Contents
Background ......................................................1
Origin and History of the Taxable Earnings Base.....................1
The Taxable Earnings Base..........................................3
The Taxable Earnings Base Today ...............................3
The Taxable Earnings Base Over Time ............................4
The Taxable Earnings Base by State ...............................5
The Taxable Earnings Base by Employment Status and Gender..........6
The Future of the Taxable Earnings Base ..........................6
Projections of the Share of the Population Earning Above the
Taxable Wage Base Over Their Lifetime ......................6
Impact of Raising or Eliminating
the Taxable Earnings Base.......................................8
Impact on Individuals’ Lifetime Payroll Taxes and Social Security
Benefits if the Taxable Wage Base Were Eliminated..............9
Aggregate Changes........................................9
Changes by Income Group..................................10
Changes by Gender.......................................11
Impact on the Social Security Trust Funds.........................12
Option 1: Cover 90% of Earnings and Pay Higher Benefits........13
Option 2: Cover All Earnings and Pay Higher Benefits...........14
Option 3: Cover All Earnings and Pay No Additional Benefits.....14
Impact on Federal Revenue.....................................14
Impact on Workers’ and Employers’ Behavior......................15
Legislation ......................................................16
Legislation in Prior Congresses..................................16
Legislation in the 110^th Congress ................................16
Arguments for and Against Raising or Eliminating the Base...............17
Arguments For...............................................17
Arguments Against...........................................18
Appendix. Taxable Earnings Bases and Worker Income: Detailed Tables.....20
List of Figures
Figure 1. Share of Earnings and Workers Above the Taxable
Earnings Base, 1950-2004.......................................5
Figure 2. Share of the Population with Earnings Above the Taxable
Wage Base Over Their Lifetime..................................7
Figure 3. Share of Beneficiaries in 2035 with Tax and Benefit Increases
Compared with Current Law If the Taxable Earnings Base
Is Eliminated, by Level of Increase...............................10

Figure 4. Share of Beneficiaries in 2035 with Higher Payroll Taxes
or Benefits Compared with Current Law If the Taxable Earnings
Base Is Eliminated, by Highest and Lowest Quintile..................11
Figure 5. Share of Male and Female Beneficiaries in 2035 with
Higher Payroll Taxes or Benefits Compared with Current Law
If the Taxable Earnings Base Is Eliminated, by Gender ...............12
List of Tables
Table 1. Impact on the Social Security Trust Funds of Raising or
Eliminating the Social Security Taxable Earnings Base...............13
Table 2. Revenue Impact of Raising the Social Security Taxable
Earnings Base................................................15
Table A-1. Social Security and Medicare Tax Rates and Taxable
Earnings Bases, 1937-2008.....................................20
Table A-2. The Number and Percentage of Covered Workers with
Social Security Taxable Earnings Over the Taxable Earnings
Base of $90,000, by State, 2005..................................22
Table A-3. Number and Percentage of Workers Above the Taxable
Earnings Base of $87,900 by Type of Earnings and Sex, 2004..........23

Social Security: Raising or Eliminating
the Taxable Earnings Base
Background
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. Social Security was enacted in 1935, and the Social Security payroll
tax was first levied in 1937. From 1937 through 1949, the tax rate was 1% (on
employee and employer, each) on earnings up to $3,000 a year. Since that time the
rate has risen to 6.2% and the taxable earnings base has been increased to help meet
the financing needs of the program, and to keep up to date with changing earnings
levels. Since 1982, the Social Security earnings base has risen at the same rate as
wages in the economy. By law the Commissioner of Social Security is required to
raise the base whenever an automatic benefit increase — cost of living adjustment
(COLA) — is granted to Social Security recipients, assuming wages have risen. The
increase in the base from $97,500 in 2007 to $102,000 in 2008 is based on the¹
increase in average wages from 2005 to 2006.
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 its plan, and the draft bill that President Roosevelt sent to the Hill 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 Depression, the
Administration’s attention was on the large number of aged people living in poverty.
Its goal in proposing a Social Security program was to complement public assistance
measures (Old-Age Assistance) in its plan. 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 non-manual workers earning $250 or more
a month from coverage (i.e., $3,000 on an annual basis). 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 it set at

¹ 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
simply are not known in time.

$3,000 per year.² In addition, the committee dropped the exemption for non-manual
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 concerns about
tax equity and attaining as much program coverage of the workforce as possible were
suggested as factors for rejecting the high-earner exemption. Not covering them
meant that they would not pay the tax where lower wage earners would, and coverage
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 were over 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 (since benefits are based on a worker’s earnings). Proponents
argued that the base needed to be raised to reflect wage or price growth so that the
benefits of moderate and well-to-do recipients would not erode over time (thereby
preserving their support for the system). Critics argued that this would increase
benefits for people who could save on their own while making saving by private
means more difficult. In 1972, as a means of financing cost-of-living adjustments for
Social Security recipients, procedures were enacted that increased the base
automatically to reflect the growth in average wages. In 1977, the base was raised
beyond what resulted from the automatic increase provision (by $7,500 over three
years) as a means of raising revenue to help shore up the program’s ailing financial
condition. These ad hoc adjustments were intended to achieve a base under which

90% of all covered payroll would be subject to tax.

Medicare was enacted in 1965 with the hospital insurance (HI) portion of the
program financed with 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.³ 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. 101-518) 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. As part of the Omnibus Budget Reconciliation Act of 1993 (P.L.

103-66) the HI base was removed, raising an estimated $29 billion in revenues over

² The maximum for a worker was to be $3,000 per year per employer, so that, under the
original legislation enacted in 1935, someone could have paid tax on more than $3,000 in
earnings per year (and received benefits from all such wages) if they worked for more than
one employer.
³ 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.

the FY1994-FY1998 period. As there is no maximum taxable earnings amount in
Medicare, Medicare financing will not be discussed further in this report.
The Taxable Earnings Base
The Taxable Earnings Base Today
In 2008, an estimated 164 million workers will pay Federal Insurance
Contributions Act (FICA) taxes and Self-Employment Contributions Act (SECA)
taxes on their wages and net self-employment income.⁴ Both employers and
employees contribute earnings 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 tax is levied on earnings up to $102,000 in 2008. The HI tax is levied
on all earnings.
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 over the limit, whether they earn $105,000 or $1 million,
pay the same dollar amount in Social Security payroll taxes. Under the 2008 limit
of $102,000, the maximum amount a wage and salary worker contributes to Social
Security is $6,324 (his or her employer contribute an equal amount) while a self-
employed individual contributes a maximum of $12,648.⁵
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. For example, the maximum amount of earnings in 2008 used to calculate
a worker’s benefit is $102,000, regardless of whether the worker earned above that
amount. If an individual earned at or above the earnings base for his or her entire
career⁶ and retired in 2008 at the full retirement age, his or her annual benefit would
be $26,220 ($2,185 per month), the maximum benefit payable under current law.⁷
However, very few Americans receive the maximum benefit as it is extremely rare
to have had such consistently high earnings over a lifetime.

⁴ Social Security Administration: 2008 Fact Sheet available at [http://www.ssa.gov/
legi slation/2008+factsheet.pdf].
Some workers (approximately 4%) 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. For a listing of
workers who are exempt from Social Security taxes see CRS Report 94-28, Social Security
and Medicare Taxes and Premiums: Fact Sheet, by Dawn Nuschler.
⁵ $102,000 x 6.2% = $6,324 and $102,000 x 12.4% = $12,648.
⁶ The Social Security benefit formula calculates benefits based on a worker’s highest 35
years of earnings.
⁷ Social Security Administration: 2008 Fact Sheet available at [http://www.ssa.gov/
legi slation/2008+factsheet.pdf].

2008 Social Security and Medicare Tax Rates and Maximum Taxable
Earnings, Maximum Taxes Paid, and Maximum Retirement Benefits
^{FICA a}^{nd SE}^{CA T}^a^x^Ra^tes:^FICA^SE^CA^a
^O^l^d-^A^g^{e an}^{d S}^u^rvⁱ^v^ors^In^s^u^ran^c^e⁵^.30%^10.60%
^+Disab^ility^Iⁿ^su^r^aⁿ^c^e^0.90%^1.80%
^=Su^b^to^{tal So}^{cial Secu}^r^ity⁽^O^A^S^DI⁾^tax^r^a^te⁶^.²⁰^%¹²^.⁴⁰^%
^{+ Ho}^sp^{ital I}ⁿ^su^r^aⁿ^{ce tax}^r^a^te^1.45%^2.90%
^T^o^t^a^l^FIC^A^{and SEC}^A^r^a^t^e^7.65%^15.30%
^Com^b^{ined E}^m^{ployee and}^E^m^plo^y^{er FICA T}^a^x^Ra^tes:
^Em^pl^oy^ee^7.65%
^+Em^p^loy^e^r^7.65%
^C^o^m^bⁱⁿ^{ed FIC}^A^r^a^t^e^15.30%
^M^a^xⁱ^mu^{m T}^a^x^a^b^l^e^E^a^rⁿⁱⁿ^g^s^:
^S^o^ci^al^S^ecu^ri^t^y^$102,000
^Ho^sp^{ital I}ⁿ^su^r^aⁿ^c^eⁿ^o^m^a^xⁱ^m^u^m
^M^a^xⁱ^m^u^m^FICA/SE^{CA T}^a^x^e^s^:^OAS^D^I^H^I
^Em^ploy^ee/Em^ploy^{er (each}^):^$6,324^{No lim}^it
^S^e^l^f^-^E^m^p^l^o^y^e^d:^$12,648^N^o^lⁱ^mⁱ^t
^S^o^{cial S}^ecu^{rity Ben}^e^{fit fo}^{r 2008 Retiree With}^E^a^rnⁱⁿ^gs
^{at or Above the M}^a^xⁱ^m^u^m^{for E}ⁿ^{tire Career}
^M^o^nt^hly^A^nnua^l
^R^e^tⁱ^r^{ed at}^ag^{e 62:}^$1,672^$20,064
^R^e^tⁱ^r^{ed at}^f^u^l^l^retⁱ^r^em^en^t^ag^{e (65+10 m}^oⁿ^t^h^s^):^$2,185^$26,220
^S^o^u^rce:^S^S^A^[^h^t^t^p^:^/^/^www.^s^s^a^.^g^o^v^/^l^e^gⁱ^s^l^a^tⁱ^oⁿ^/²⁰⁰⁸⁺^f^a^c^t^s^h^e^e^t^.pdf^]^.
^a^.^C^e^r^t^aⁱ^{n a}^d^jus^t^m^e^nts^a^{nd inc}^o^m^e^ta^x^de^duc^tions^a^pply^.
The Taxable Earnings Base Over Time
The portion of Social Security covered earnings that are 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 its low of 71%. Prior to 1972, the taxable earnings base was updated
periodically by Congress, which contributed to its dramatic fluctuations in the 1950s
and 1960s. Since 1972, the base has been indexed to the increase in wages in the
economy which has reduced the volatility somewhat. As described earlier, to raise
revenue Congress raised the taxable earnings base in the 1977 amendments to the
Social Security Act to a level that would cover 90% of aggregate earnings by 1982.
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 are taxed has fallen from 90% of all earnings in 1982 to 86% in 2004.

The large declines in the late 1990s were mainly due to the fact that salaries for top
earners grew faster than the pay of workers below the cap.⁸
Figure 1. Share of Earnings and Workers Above
the Taxable Earnings Base, 1950-2004

100
Percent of
90 coveredearnings
below Social
eSecurity
80base
70Percentag
Percent of
60workers withcovered
earnings
50below SocialSecurity
05050505050base
195 195 196 196 197 197 198 198 199 199 200
Year
^Source:^Fig^u^r^{e prepared by}^C^oⁿ^g^r^es^sⁱ^on^{al R}^e^s^earch^Serv^ice^(C^R^S^{), bas}^e^{d on}^{data f}^r^om^th^{e Social}
^Se^c^u^rⁱ^t^y^A^d^mⁱⁿⁱ^st^r^a^tⁱ^o^n,^A^nnua^l^Sup^p^l^e^m^eⁿ^t^,^2006.
The Taxable Earnings Base by State
In 2005, six percent of workers had earnings above the taxable base of $90,000.⁹
However, focusing on the nationwide average hides the diversity among the states
and the District of Columbia. The share of the population above the base in 2005
ranges from a high in the District of Columbia, where 12% of covered workers earn
above the base, to a low in South Dakota, where 2% of workers earn above this
amount (Table A-2). The states with the lowest share of workers over the base are
South Dakota, Mississippi, Arkansas, North Dakota, and Montana. Those with the
highest share of workers over the base are the District of Columbia, New Jersey,
Connecticut, Massachusetts, and Maryland.
⁸ 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. (SSA, 2005 OASDI Trustees Report.)
⁹ Note that the years denoted for Tables A-1, A-2, and A-3 differ slightly due to differences
in availability of data.

The Taxable Earnings Base by
Employment Status and Gender
According to statistics from the Social Security Administration, a small share
of workers earn above the taxable earnings base each year. In 2004, 6% of workers
(9.4 million individuals) earned more than the taxable earnings base (Table A-3).¹⁰
Most of the individuals earning above the base were men (7.4 million individuals or
roughly 80% of the total). In 2004, 9% of all male workers and 3% of all female
workers had earnings above the maximum. Most individuals earning above the base
were wage and salary workers (roughly 90% of the total). Only 1 in 10 individuals
who earned above the base were self-employed. Roughly 6% of all wage and salary
workers (8.6 million individuals) and 5% of all self-employed workers (809,000
individuals) had earnings above the base in that year.
The Future of the Taxable Earnings Base
The taxable wage 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, due to increasing earnings inequality, the share of payroll that is
taxed is expected to decline even further. Under the intermediate assumptions of the
2007 Trustees Report, the percentage of covered earnings that is taxable is projected
to decline to about 83% for 2015. However, the Trustees Report assumes the levels
will remain stable thereafter.
Projections of the Share of the Population Earning
Above the Taxable Wage Base Over Their Lifetime
Workers’ earnings rise and fall during their careers, so any analysis of the
population that earns above the taxable wage 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. To address this issue, CRS used the Dynasim
microsimulation model to estimate the share of individuals in the future who will
ever have earned above the current-law taxable wage base over the course of their
lifetimes.¹¹

¹⁰ Social Security Administration, Annual Statistical Supplement 2006, [http://www.ssa.gov/
policy/docs/statcomps/supplement/2006/4b.html#table4.b1]. ( Hereafter referred to as SSA
Statistical Supplement, 2006.)
¹¹ The Urban Institute’s Dynamic Simulation of Income Model (Dynasim) is a computer
model that uses survey data to project earnings, demographic changes, retirement income,
and Social Security benefits through the year 2050. For more information about the model,
how it works, and how to interpret results, see CRS Report RL33840, Options to Address
Social Security Solvency and Their Impact on Beneficiaries: Results from the Dynasim
Microsimulation Model, by Laura Haltzel, et. al.

Figure 2. Share of the Population with Earnings Above the
Taxable Wage Base Over Their Lifetime

^Source:^Coⁿ^g^r^essioⁿ^{al Resear}^ch^Ser^v^{ice (}^CRS)^calcu^latioⁿ^s^u^sⁱⁿ^g^th^e^U^r^b^aⁿ^Iⁿ^stitu^te’^s^Dyⁿ^a^sim
^mⁱ^cr^o^s^im^u^l^atioⁿ^m^o^d^e^l.
In 2004, 6% of workers earned more than the taxable earnings base.¹² The
Dynasim model projects this share will remain relatively constant over time. While
a small share of workers are projected to earn above the taxable earnings base in a
given year, the model estimates that roughly one in five individuals would earn above
the maximum at some point in their lifetimes (Figure 2). The model projects that
12% of workers would earn above the earnings base for between one and five years
over the course of their working lives. Very few individuals sustain the high earnings
for long periods in their careers. The model estimates that only 5% of workers would
earn above the taxable wage base for more than five years.¹³
Very few individuals have earnings higher than a level of taxable earnings that
would cover 90% of aggregate earnings (the level Congress attempted to achieve
when it last addressed Social Security’s finances). The Dynasim model projects that
roughly 1% of workers have earnings above a 90% limit each year. In other words,
due to high levels of earnings inequality, roughly 1% of the population earn 10% of¹⁴
all the earnings. Looking over the course of an individual’s lifetime, the model
¹² SSA Statistical Supplement, 2006.
¹³ The share of the population affected by this policy is influenced by the way the Dynasim
model projects an individual’s earnings. There is a significant amount of year-to-year
variation in the projection of each individual’s earnings.
¹⁴ The Dynasim model projections are consistent with current data on wage inequality. In
(continued...)

projects that less than 4% of the population would ever earn above the 90% base and
nearly all of those who do would earn above the base for less than five years (Figure

2).

Impact of Raising or Eliminating
the Taxable Earnings Base
Raising or removing the taxable earnings base could reduce or eliminate the¹⁵
long-term Social Security deficit. The additional tax revenues would be substantial.
However, 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 taxable wage 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. While the solvency impact would be improved to a greater degree if the
cap on taxes was eliminated and the cap on benefits was retained, the traditional link
between contributions and benefits would be broken.
Rather than eliminate the taxable wage 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.
Rising inequality — primarily increases in the earnings of the highest paid
individuals — has led to a decline in the share of U.S. 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 U.S. earnings — restoring it to roughly the level in 1982 when
Congress last addressed Social Security’s finances. The Social Security
Administration and the Joint Committee on Tax 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
wage base on individuals, the Social Security trust funds, on federal revenue, and on
workers’ and employers’ behavior.

¹⁴ (...continued)
2004, the top 1% of earners were paid 11% of aggregate earnings (source: CRS analysis of
the March 2005 Current Population Survey).
¹⁵ There is precedent for this proposal. 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.

Impact on Individuals’ Lifetime Payroll Taxes and Social
Security Benefits if the Taxable Wage Base Were Eliminated
To estimate how much individuals’ taxes and benefits would rise if the wage
base were eliminated, CRS has used the Dynasim microsimulation model to look at
Social Security beneficiaries in the year 2035. The estimates assume the taxable
wage base would be completely eliminated starting in 2013 for calculating both the
payroll taxes and future Social Security benefits. The following sections detail the
impact of eliminating the base on beneficiaries based on their income and gender.¹⁶
Aggregate Changes. If the base were removed, the majority of beneficiaries
would pay no additional taxes compared with current law, as fewer than 8% of
workers are projected to earn above the taxable wage base each year. Examining the
impact on individuals receiving Social Security benefits in 2035, roughly one in five
beneficiaries (21%) would have paid any additional taxes over their lifetimes
compared with current law (Figure 3). For most of these affected individuals, the
increase would be moderate. Roughly 16% of all beneficiaries would see their
lifetime tax payments increase by less than 10%. However, 3% of all beneficiaries
would have their tax payments increase by 10% to 19%, and 2% would have tax
increases of 20% or more.
To maintain the traditional link between contribution and benefits, policymakers
could choose to calculate benefits based on a worker’s total earnings, including those
above the taxable wage base. Under this option, some beneficiaries would receive
higher Social Security benefits. CRS estimates that 23% of beneficiaries in 2035
would have higher benefits than under current law. This share of beneficiaries who
receive higher benefits is greater than the share of individuals who pay higher taxes
because some low earners receive benefits based on their spouses’ higher earnings.
Most of the affected beneficiaries (20%) would see their benefits increase by less
than 10% relative to current law. Only 3% of beneficiaries would see their benefits
increase by 10% or more.
While 21% of beneficiaries in 2035 would pay some additional payroll taxes
over the course of their lifetimes if the base were removed, the average change in
taxes and benefits would be small. Looking only at individuals who would pay
higher taxes over the course of their lifetimes, at the median, total lifetime tax
payments would rise by 3% and benefits would increase by 2% relative to current
law.

¹⁶ CRS estimates of the impact of this and other reform proposals, including raising the base
to cover 90% of taxable earnings, are also available based on beneficiaries’ socioeconomic
status (including ethnicity, education, and marital status). (CRS Report RL33841, Options
to Address Social Security Solvency and Their Impact on Beneficiaries: Results from the
Dynasim Microsimulation Model — Detailed Distributional Tables, by Laura Haltzel, et.
al.)

Figure 3. Share of Beneficiaries in 2035 with Tax and Benefit
Increases Compared with Current Law If the Taxable Earnings
Base Is Eliminated, by Level of Increase

^S^o^urce:^Coⁿ^g^r^essioⁿ^{al Resear}^ch^Ser^v^{ice (}^CRS)^calcu^latioⁿ^s^u^sⁱⁿ^g^th^{e Ur}^b^aⁿ^Iⁿ^stitu^te’^s^D^yⁿ^a^sⁱ^m
^mⁱ^cr^o^s^im^u^l^atioⁿ^m^o^d^e^l.
^No^te:^Lⁱ^f^e^tim^{e tax}^e^sⁱⁿ^clu^d^{e both}ⁱⁿ^divⁱ^du^{al an}^{d em}^pl^oy^{er O}^A^S^D^{I con}^t^ri^bu^tⁱ^oⁿ^s^or^s^e^l^f^-^e^m^p^l^o^y^m^en^t
^c^o^nt^rⁱ^b^u^tⁱ^o^{ns t}^h^r^o^ugho^ut^t^h^eⁱⁿ^dⁱ^vi^d^u^a^l^{’s e}ⁿ^tⁱ^r^e^c^a^r^e^e^r^.
Changes by Income Group. The impact of eliminating the taxable wage
base on payroll taxes paid varies significantly by income group.¹⁷ The overwhelming
majority (98%) of beneficiaries in 2035 in the lowest income quintile would pay no
additional taxes over their lifetime (Figure 4). Few in this group would receive
benefit increases if the cap were removed. Under this proposal only 3% of
beneficiaries in the lowest income category would receive benefit increases, and the
increase would be for less than 10%.
The story is different for higher income beneficiaries. Roughly one-half of those
in the highest income quintile are estimated to have had tax increases over their
lifetimes relative to current law. While 35% of beneficiaries in the top quintile
would see their lifetime taxes rise by less than 10%, some (7%) would see their taxes
rise between 10% and 19% and some (6%) would see their taxes rise 20% or more.
Beneficiaries in the highest income groups would also see the largest change in their
benefits if the taxable wage base were removed. One-half of beneficiaries in the top
¹⁷ Note that the income groups are defined in 2035 using family income after an individual
claims disability, retirement, survivor, or spousal benefits. Thus, some low income
beneficiaries are affected by the policy if they earned above the taxable wage base at any
point in their careers.

fifth of the income distribution in 2035 would have an increase in benefits relative
to current law. In this highest quintile, 42% would have benefit increases of less than
10%, some (5%) would have benefit increases of 10%-19% and a few (3%) would
have benefit increases of 20% or more.
Figure 4. Share of Beneficiaries in 2035 with Higher Payroll
Taxes or Benefits Compared with Current Law If the Taxable
Earnings Base Is Eliminated, by Highest and Lowest Quintile

^Source:^Coⁿ^g^r^essioⁿ^{al Resear}^ch^Ser^v^ic^e⁽^C^R^S⁾^calcu^latioⁿ^s^u^sⁱⁿ^g^th^{e Ur}^b^aⁿ^Iⁿ^stitu^te’^s^Dyⁿ^a^sim
^mⁱ^cr^o^s^im^u^l^atioⁿ^m^o^d^e^l.
Changes by Gender. Since the majority of workers who earn above the
taxable wage base in a given year are men (Table A-3 and described above), men
would be more likely to pay higher payroll taxes than women if the taxable wage
base were eliminated. Among men who receive benefits in 2035, more than one in
four would pay higher payroll taxes over the course of their lifetimes (Figure 5).
Twenty percent of male beneficiaries would have a tax increase of less than 10%, but
7% would see their lifetime tax contributions increase by more than 10%. If the
taxable earnings base was removed, one in four men would receive higher benefits.
The majority of the men affected (22% of all male beneficiaries) would see a small
increase in benefits, but 3% of all men would have benefits increase by more than
10%. In contrast, only 15% of women who receive benefits in 2035 would have paid
any additional payroll taxes over the course of their lives. Of these women, only 2%
would have an increase of over 10%. Since many women receive benefits based on
their spouses’ earnings, the share of women who would see a rise in benefits is higher
than the share that would pay additional taxes. Although the benefits of one in five

female beneficiaries in 2035 would rise, for most it would be a small increase of less
than 10%.
Figure 5. Share of Male and Female Beneficiaries in 2035 with
Higher Payroll Taxes or Benefits Compared with Current Law If
the Taxable Earnings Base Is Eliminated, by Gender

1%1%1%100%

2%1%1%3%

13%18%22%4%90%

20%

80%

70%

60%

50%

85%80%40%

73%75%

30%

20%

10%

Taxes Benef i t s T axes Benef i t s
MenWomen
no changeup to 10%10%-19% 20% or more
^Source:^C^oⁿ^g^r^es^sⁱ^on^{al R}^e^s^earch^Serv^{ice (C}^R^S^{) calcu}^lation^s^u^sⁱⁿ^g^th^{e Urb}^aⁿ^Iⁿ^s^tⁱ^t^u^t^e’^s^Dyⁿ^a^sⁱ^m
^mⁱ^cr^o^s^im^u^l^atioⁿ^m^o^d^e^l.
Impact on the Social Security Trust Funds
Under the assumptions of the 2005 Trustees Report, the actuaries at the Social
Security Administration calculate that it would take an immediate increase in
combined payroll taxes of 1.92% of taxable payroll (from 12.40% to 14.32%) to
achieve solvency over the next 75 years.¹⁸ Without this increase or other changes to
the system, the 2005 Trustees Report projected that the OASDI Trust Funds would
be exhausted in 2041. The actuaries at SSA have estimated the impact on the Trust
Funds of three options to change the benefit and contribution base which are
described below.
¹⁸ The projections in this section were done using the assumptions of the 2005 Trustees
Report to match the estimates in Table 4 which are the most recent estimates available for
these options.

Table 1. Impact on the Social Security Trust Funds of Raising or
Eliminating the Social Security Taxable Earnings Base
Year the75-Year Percent of
TrustActuarial Balance75-Year
Funds Are(as % of taxableShortfall
Exhaus t e d payr oll) Met
No change to current law2041-1.92
Option 1: Make 90% of the earnings2044-1.0943%
subject to the payroll tax and credit
them for benefit purposes (phased in

2006-2015)

Option 2: Make all earnings subjectn.a.^a-0.1095%
to the payroll tax and credit them for
benefit purposes (beginning in 2006)
Option 3: Make all earnings subjectn.a.^a0.28115%
to the payroll tax but retain the cap
for benefit calculations (beginning in

2006)

^Sources^:^So^cⁱ^a^l^Se^c^u^rⁱ^t^y^A^d^mⁱⁿⁱ^st^r^a^tⁱ^o^n,^M^e^m^o^r^a^nd^um^,^d^a^t^e^d^A^ugust¹⁰^,^2005.

^No^tes:^A^l^l^cal^cu^l^a^tⁱ^oⁿ^s^u^s^{e t}^h^{e i}ⁿ^t^e^rm^edi^a^t^e^as^s^u^m^p^tⁱ^oⁿ^s^of^t^h^{e 2005 T}^r^u^s^t^ees^R^e^port^.
^{a. Solv}^en^{t bey}^oⁿ^d^75-^y^{ear es}^tim^ate.
Option 1: Cover 90% of Earnings and Pay Higher Benefits. One
proposal would slowly raise the taxable wage base for both employers and employees
to cover 90% of all earnings and credit these taxes to allow individuals to receive
correspondingly higher benefits. In 2006, it was estimated that a cap of $171,600
would roughly cover 90% of wages.¹⁹ Under this option, benefits at retirement for
high earners would also rise. These changes would have a net positive impact on the
Social Security Trust Funds (Table 1). Raising the wage base to 90% would
eliminate 43% of the long-range financial shortfall — extending the Trust Funds’
exhaustion date to 2044. To achieve solvency for the full 75-year projection period
under this option, the total payroll tax rate would have to be raised by an additional
1.09 percentage points (from 12.40% to 13.49%) or other policy changes would have
to be made to cover the shortfall.²⁰

¹⁹ Social Security Administration, Estimated Financial Effects of “A Nonpartisan Approach
to Reforming Social Security - A Proposal Developed by Jeffrey Liebman, Maya
MacGuineas and Andrew Samwick” — INFORMATION, Memorandum, dated November

17, 2005, [http://www.ssa.gov/OACT/solvency/Liebman_20051117.pdf].

²⁰ Social Security Administration, Estimated OASDI Long-Range Financial Effects of
Several Provisions Requested by the Social Security Advisory Board, Memorandum, dated
^A^ugust¹⁰^,²⁰⁰⁵, available at [http://www.ssa.gov/OACT/solvency/provisions/index.html].

Option 2: Cover All Earnings and Pay Higher Benefits. If the earnings
base was completely eliminated for both employers and employees so that all
earnings were taxed, 95% of the projected financial shortfall in the Social Security
program would be eliminated. To achieve solvency for the full 75-year projection
period under this option, the total payroll tax rate would have to be raised by an
additional 0.1 percentage points (from 12.4% to 12.5%) 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. However, the net benefit to the Trust Funds is positive as $5 in additional
revenue would provide only $1 in additional benefits (on average over their 75-year
valuation period). Annual Social Security benefit payments would be much higher
than today’s maximum of $25,440. 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% — while someone with lifetime earnings of $1
million a year would get a monthly Social Security benefit of approximately $13,500^21,22
a month or $162,000 a year — a replacement rate of 16.2%.
Option 3: Cover All Earnings and Pay No Additional Benefits.
Finally, if the base was completely eliminated for both employers and employees so
that all earnings were taxed, but those earnings did not count toward benefits,
solvency would be restored to Social Security. The increased revenue would
eliminate 115% of the projected shortfall and the program would have a projected
surplus equal to .28% of taxable payroll. Under this scenario, the payroll tax rate
could be immediately lowered from 12.40% to 12.12% and the system would remain
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.
Impact on Federal Revenue
Raising the taxable earnings base would lead to an increase in total federal
revenues. The Joint Committee on Taxation has estimated that raising the wage base
to 90% of earnings, to $186,000 in 2008, would generate $221 billion in additional
revenue over the five-year budget window of 2008-2012 (Table 2).^23,24 Over 10

²¹ Calculations are for 2005 from Reno and Lavery, Options to Balance Social Security
Funds, February 2005.
²² Benefits this high would be extremely rare as very few individuals earn above the taxable
wage base for their entire career.
²³ Congressional Budget Office, Budget Options, Revenue Option 39: Increase the Upper
Limit for Earnings Subject to the Social Security Payroll Tax, February 2007
[ h t t p : / / www.cbo.gov] .
²⁴ Note that the estimates by the actuaries at the Social Security Administration (SSA) and
the Joint Committee on Taxation (JCT) differ slightly due to different assumptions. SSA
assumes the maximum wage base will be adjusted each year to keep taxable wages at a
constant percent of wages while the JCT assumes it will be a one-time increase with
(continued...)

years, the policy would generate more than $524 billion. Raising the payroll tax base
to cover an additional 1%-2% of income (above the 90% level) would generate $32-
$64 billion more over five years and $80-$158 billion more over 10 years.
Table 2. Revenue Impact of Raising the Social Security
Taxable Earnings Base
Taxable Wage BaseTotal Change in Revenues
(dollars)(billions of dollars)
Y e ar 2008 2008-2012 2008-2017
Tax 92% of earnings250,000+284.7+682.7
Tax 91% of earnings214,000+253.5+604.3
Tax 90% of earnings186,000+221.1+524.4
^Source:^Joiⁿ^t^C^o^m^mⁱ^t^t^{ee on T}^a^xatⁱ^{on, 2007.}
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 and was not taken into consideration in the
above estimates of the distributional, trust fund, and revenue impacts.
Workers who earn more than the cap would have a reduced incentive to work
as their after-tax earnings will fall.²⁵ However, whether these individuals would
significantly reduce the amount they work is a matter of debate.²⁶ Each worker
would face a decision between the reduced earnings and the additional leisure time,
based on the worker’s individual preferences. Workers who have earnings 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.²⁷
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 wage base
toward Social Security. If employers are unable to pass along the higher tax costs to

²⁴ (...continued)
adjustments only for inflation thereafter. JCT estimates also account for the effects on all
sources of revenue including changes to income taxes and Medicare taxes.
²⁵ The response by high earners may depend on whether the wage base is raised slightly or
completely eliminated.
²⁶ For a more detailed discussion of this debate, see CRS Report RL33944, Increasing the
Social Security Payroll Tax Base: Options and Effects on Tax Burdens, by Thomas L.
Hungerford.
²⁷ See Martin Sullivan, “Budget Magic and the Social Security Tax Cap,” Tax Notes, March

14, 2005.

workers in the form of reduced earnings, their overall labor costs will increase.
Employers may react by raising prices to consumers, reducing other non-wage forms
of compensation such as health benefits or pensions, or reducing the number of
workers.
Legislation
Legislation in Prior Congresses
A number of proposals to raise or eliminate the taxable wage base have been
made in recent sessions of Congress, although none have received legislative action.
In the 105^th Congress, Senator Moynihan proposed raising the base to $97,500 by
2003 ($15,600 more than it was projected to be under current law) as part of a
package of changes to restore Social Security’s long-range solvency (S. 1792). He
again included an increase in the base in a solvency package he introduced in the
106^th Congress (S. 21). Similar base hikes were contained in other solvency bills in
the 106^th introduced by Senators Gregg and Breaux, et al. (S. 1383 and S. 2774) and
by Representative Nadler (H.R. 1043). In the 107^th Congress, H.R. 2771, introduced
by Representatives Kolbe and Stenholm, held the base at 86% of total payroll. In the

108^th Congress, two bills raised the wage base. A bill by Kolbe and Stenholm (H.R.

3821) gradually raised the base to $133,200 in 2008 and then held the base equal to

87% of total payroll thereafter. H.R. 5179, sponsored by Representative Obey,

brought the percentage of covered earnings subject to the Social Security payroll tax
up to 90% by increasing the rate of growth in the Social Security taxable wage base
by 2 percentage points above average wage growth for years 2006 through 2036.
Two bills were introduced in the 109^th Congress to change the taxable wage
base. H.R. 440, introduced by Representatives Kolbe and Boyd, gradually raised the
base to $142,500 in 2010 and then indexed it to 87% of total payroll thereafter. A
bill by Representative Wexler (H.R. 2472) required workers and employers to each
contribute 3% of earnings above the taxable wage base, while self-employed
individuals contribute 6% of earnings above the taxable wage base. Under the
Wexler bill, earnings above the taxable wage base taxed at the 3% rate would not be
credited for benefit computation purposes.
Legislation in the 110^th Congress
In the 110^th Congress, a bill by Representative Wexler (H.R. 5779) was
introduced that would require workers and employers to each contribute 3% of
earnings above the taxable wage base, while self-employed individuals contribute 6%
of earnings above the taxable wage base. These contributions are in addition to the
Social Security contributions payable under current law for wages below the current
taxable wage base. Under the Wexler bill, earnings above the taxable wage base
would not be credited for benefit computation purposes.

Arguments for and Against Raising or
Eliminating the Base
Some of the general 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. Workers earning less than the base have a greater proportion of
earnings taxed than workers whose earnings exceed it. In 2008, someone with annual
earnings of $30,000 pays $1,860 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 $102,000 in earnings, someone earning $200,000 a year pays $6,324
or 3% 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, due to rising earnings
inequality, the amount of their earnings that escapes taxation has risen from 12% to
15% since 1991, and is projected to continue to rise through 2014. They therefore
contend that the current tax structure favors a small group of the more well-off
workers in society.
They also point out that the overall employee tax rate rose from 6.13% in 1980
to 7.65% in 1990 (counting the Medicare portion) — or by 25% — and assert that
this increase is one of the main reasons for a disproportionate rise in the aggregate
federal tax burden on lower and middle-income people over that decade.²⁸ They
further maintain that for most workers, Social Security and Medicare taxes (counting
the employer share, which they view as foregone wages) are now greater than their
income taxes.
Supporters argue that subjecting a larger percentage of earnings to the payroll
tax would also adjust for the higher life expectancies of high earners.²⁹ On average,
people with more education and higher earnings live longer than those with lower
earnings and less education and this difference has been growing over time. The
impact on the Social Security program is that these individuals receive benefits for
more years over their lifetimes making the system less progressive.³⁰ They claim that
raising the taxable wage base would make a reasonable adjustment for the faster-
than-average life expectancy gains among high earners.

²⁸ See CRS Report RL32693, Distribution of the Tax Burden Across Individuals: An
Overview, by Jane G. Gravelle and Maxim Shvedov.
²⁹ See Peter A. Diamond and Peter R. Orzag, Saving Social Security: A Balanced Approach,
Brookings Institution, 2004.
³⁰ 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.

Thus, supporters of changing the base argue that raising or eliminating the base
not only would be more fair, but also that Social Security’s projected long-range
financing problems could be substantially alleviated or, alternatively, that the payroll
tax rate could be reduced without causing a loss of revenue to the system. It is
estimated that almost $100 billion in revenue to the Social Security program would
be generated annually by taxing all earnings, and if such revenues were not used to
lower the tax rate, they would reduce the government’s outstanding debt and
eliminate about 95% of Social Security’s long-range deficit.
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. Others have claimed that increasing the base
to 90% would be a large tax increase for those who earn between the current base and
the new level, but would have little impact on the share of taxes paid by individuals
with the highest earnings.³¹ Other options would be to remove the cap completely
over the base, but lower the tax rate on those higher earnings³² or tax employers and
employees at different rates above the current base. Others have called for
broadening the sources of income that are taxed beyond earnings.³³ 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 while the structure of
the payroll tax may be regressive, it is offset by the progressive calculation of
benefits.
They 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 $41,646 in
2008 for married workers with two or more children (up to $15,880 for married
workers without children). 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

³¹ For a study of how the effective tax rates paid by different income groups would change
under such a proposal, see CRS Report RL33949, Increasing the Social Security Payroll
Tax Base: Options and Effects on Tax Burdens, by Thomas L. Hungerford.
³² Robert C. Posen, “PIN Money,” Wall Street Journal, January 9, 2007.
³³ 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].

proportional (because it is flat-rate). It is only at the upper end of the income
spectrum that it takes on a regressive appearance.
Critics also argue that raising the cap will serve as a disincentive to work and
could serve as a drain on the economy.³⁴ Because additional work effort would
generate less after-tax income, supporters claim that workers faced with this higher
marginal rate would either reduce their hours or avoid the tax by changing the form
of their compensation.
From another perspective, some — who might otherwise espouse progressive
taxation — support raising the base but not eliminating it. Having a cap makes
Social Security seem less like general purpose taxation. They argue that the system
needs support from people of all earnings levels, and that the larger benefits that high
earners would receive would represent a poor return for the higher taxes they would
pay. Moreover, regardless of the money’s worth issue, some question the wisdom
of paying large benefits to well-to-do people. They argue 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. They 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.

³⁴ See D. Mark Wilson, Removing the Social Security’s Tax Cap on Wages Would Do More
Harm Than Good, The Heritage Foundation, October 18, 2001.

Appendix. Taxable Earnings Bases and
Worker Income: Detailed Tables
Table A-1. Social Security and Medicare Tax Rates
and Taxable Earnings Bases, 1937-2008
^Ta^{x R}^a^t^e^s^Ma^xⁱ^m^u^m^{Percent of}^{Percent of}
^w^o^rk^ers^wⁱ^th^covered
^Yea^r^tax^a^{ble earnings}^{for Social}^earnings^earnings^Self^-^e^m^p^lo^y^e^d
^So^cia^l^HI^a^{(Social Security}
^{Security and HI}^belo^w^So^cia^l^{Security bas}^e^belo^w^So^cia^l^{Security bas}^e^Security^a^a^{nd H}^I
^com^b^ined)
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
¹⁹⁶⁶^3.850^0.35^6.15^6,600^75.8^80.0
¹⁹⁶⁷^3.900^0.5⁶^.4^6,600^73.6^78.1
¹⁹⁶⁸^3.800^0.6⁶^.4^7,800^78.6^81.7
¹⁹⁶⁹^4.200^0.6⁶^.9^7,800^75.5^80.1
¹⁹⁷⁰^4.200^0.6⁶^.9^7,800^74.0^78.2
¹⁹⁷¹^4.600^0.6⁷^.5^7,800^71.7^76.3
¹⁹⁷²^4.600^0.6⁷^.5^9,000^75.0^78.3
¹⁹⁷³^4.850^1.0⁸^.0^10,800^79.7^81.8
¹⁹⁷⁴^4.950^0.9⁷^.9^13,200^84.9^85.3
¹⁹⁷⁵^4.950^0.9⁷^.9^14,100^84.9^84.4
¹⁹⁷⁶^4.950^0.9⁷^.9^15,300^85.1^84.3
¹⁹⁷⁷^4.950^0.9⁷^.9^16,500^85.2^85.0
¹⁹⁷⁸^5.050^1.0⁸^.1^17,700^84.6^83.8
¹⁹⁷⁹^5.080^1.05^8.1^22,900^90.0^87.3
¹⁹⁸⁰^5.080^1.05^8.1^25,900^91.2^88.9
¹⁹⁸¹^5.350^1.3⁹^.3^29,700^92.4^89.2
¹⁹⁸²^5.400^1.3⁹^.35^32,400^92.9^90.0

^Ta^{x R}^a^t^e^s^Ma^xⁱ^m^u^m^{Percent of}^{Percent of}
^w^o^rk^ers^wⁱ^th^covered
^Yea^r^tax^a^{ble earnings}^{for Social}^earnings^earnings^Self^-^e^m^p^lo^y^e^d
^{Security and HI}^belo^w^So^cia^l^{Security bas}^e^belo^w^So^cia^l^{Security bas}^e^So^cia^l^Security^a^HI^a^{(Social Security}^a^{nd H}^I
^com^b^ined)
¹⁹⁸³^5.400^1.3⁹^.35^35,700^93.7^90.0
¹⁹⁸⁴^5.700^1.3^14.0^37,800^93.6^89.3
¹⁹⁸⁵^5.700^1.35^14.1^39,600^93.5^88.9
¹⁹⁸⁶^5.700^1.45^14.3^42,000^93.8^88.6
¹⁹⁸⁷^5.700^1.45^14.3^43,800^93.9^87.6
¹⁹⁸⁸^6.060^1.45^15.02^45,000^93.5^85.8
¹⁹⁸⁹^6.060^1.45^15.02^48,000^93.8^86.8
¹⁹⁹⁰^6.200^1.45^15.3^51,300^94.3^87.2
¹⁹⁹¹^6.200^1.45^15.3^53,400^94.4^87.8
⁽^H^I^-^125,000)
¹⁹⁹²^6.200^1.45^15.3^55,500^94.3^86.8
⁽^H^I^-^130,200)
¹⁹⁹³^6.200^1.45^15.3^57,600^94.4^87.2
⁽^H^I^-^135,000)
¹⁹⁹⁴^6.200^1.45^15.3^60,600^a^94.6^87.1
^{(HI-no lim}^it)
¹⁹⁹⁵^6.200^1.45^15.3^61,200^94.2^85.8
^{(HI-no lim}^it)
¹⁹⁹⁶^6.200^1.45^15.3^62,700^93.9^85.7
^{(HI-no lim}^it)
¹⁹⁹⁷^6.200^1.45^15.3^65,400^93.8^85.1
^{(HI-no lim}^it)
¹⁹⁹⁸^6.200^1.45^15.3^68,400^93.7^84.5
^{(HI-no lim}^it)
¹⁹⁹⁹^6.200^1.45^15.3^72,600^93.9^83.9
^{(HI-no lim}^it)
²⁰⁰⁰^6.200^1.45^15.3^76,200^93.8^83.2
^{(HI-no lim}^it)
²⁰⁰¹^6.200^1.45^15.3^80,400^94.0^b^84.7^b
^{(HI-no lim}^it)
²⁰⁰²^6.200^1.45^15.3^84,900^94.6^b^86.1^b
^{(HI-no lim}^it)
²⁰⁰³^6.200^1.45^15.3^87,000^94.5^b^86.1^b
^{(HI-no lim}^it)
²⁰⁰⁴^6.200^1.45^15.3^87,900^94.1^b^85.7^b
^{(HI-no lim}^it)
²⁰⁰⁵^6.200^1.45^15.3^90,000^No^{t y}^e^{t k}ⁿ^o^wⁿ^No^{t y}^e^{t k}ⁿ^o^wⁿ
^{(HI-no lim}^it)
²⁰⁰⁶^6.200^1.45^15.3^94,200^No^{t y}^e^{t k}ⁿ^o^wⁿ^No^{t y}^e^{t k}ⁿ^o^wⁿ
^{(HI-no lim}^it)
²⁰⁰⁷^6.200^1.45^15.3^97,500^No^{t y}^e^{t k}ⁿ^o^wⁿ^No^{t y}^e^{t k}ⁿ^o^wⁿ
^{(HI-no lim}^it)
²⁰⁰⁸^6.200^1.45^15.3^102,000^No^{t y}^e^{t k}ⁿ^o^wⁿ^No^{t y}^e^{t k}ⁿ^o^wⁿ
^{(HI-no lim}^it)
^S^o^u^rce:^Socⁱ^a^l^Se^c^u^rity^Bulle^tin,^{Annual Statis}^tic^{al Supple}^m^en^t^,²⁰⁰⁵^a^t^[^h^t^t^p^:^/^/^www.^s^s^a^.^g^o^v^/^p^o^lⁱ^c^y/
^doc^s^/^s^t^a^t^c^o^m^p^s^/^s^upple^m^eⁿ^t/2005]^.
^a^.^Sa^m^e^f^o^r^e^m^ploy^e^r^e^x^c^e^p^{t 1984 —}^e^m^ploy^e^e^s^r^ecei^ved⁰^.³^%^credⁱ^t⁽ⁿ^o^t^ref^l^ect^ed^ab^o^v^e).^V^a^ri^o^u^s^credⁱ^t^s^al^so
^a^pplie^{d to s}^e^lf^-^e^m^p^loy^e^{d (}^{not r}^e^f^l^e^c^t^e^d^a^bov^e⁾^f^o^r^1984-^{1989 pe}^rⁱ^od.
^b^.^E^s^tⁱ^m^at^es.

Table A-2. The Number and Percentage of Covered Workers
with Social Security Taxable Earnings Over the Taxable
Earnings Base of $90,000, by State, 2005
^Num^b^{er and s}^h^{are of covered w}^o^rk^ers^wⁱ^th
^T^o^{tal Num}^b^{er of}^{Social Security tax}^a^bl^{e earn}ⁱⁿ^gs^ab^{ove th}^e
^St^a^t^e^{covered w}^o^rk^ers^tax^a^{ble earnings}^bas^e
^wⁱ^{th Social Security}^a^Num^b^er^Percent
^tax^a^{ble earnings}^{of w}^o^rk^ers^{of w}^o^rk^ers
^U^.^S^.^T^o^t^a^l^154,603,000^9,509,000^6.2
^A^l^abam^a^2,292,200^87,400^3.8
^A^l^as^k^a^373,600^20,900^5.6
^A^rⁱ^z^on^a²^,859,100^164,100^5.7
^A^r^k^aⁿ^s^as^1,440,100^39,300^2.7
^C^a^lⁱ^f^ornⁱ^a^16,561,300^1,466,000^8.9
^C^o^l^o^rado^2,370,400^160,000^6.7
^C^oⁿⁿ^ectⁱ^c^u^t^1,927,200^195,900^10.2
^Dⁱ^s^t^ri^ct^of^C^o^l^u^m^bⁱ^a^353,100^42,600^12.1
^D^e^l^a^w^a^re^500,000^28,600^5.7
^F^l^ori^d^a⁹^,114,900^439,600^4.8
^G^e^orgⁱ^a⁴^,536,300^259,500^5.7
^H^a^w^aⁱⁱ^705,900^29,600^4.2
^Idah^o^757,800^27,200^3.6
^Illin^ois⁶^,436,200^456,500^7.1
^In^di^an^a³^,551,900^141,500^4.0
^Iow^a^1,701,300^58,400^3.4
^K^aⁿ^s^as^1,525,500^66,600^4.4
^K^eⁿ^t^u^c^k^y^2,114,500^73,400^3.5
^L^o^uⁱ^sⁱ^an^a²^,066,900^86,300^4.2
^Maiⁿ^e^762,200^25,700^3.4
^Mary^l^aⁿ^d^3,117,500^282,700^9.1
^Mas^s^ach^u^s^et^t^s^3,381,200^326,900^9.7
^Mi^chⁱ^g^an^5,306,700^314,700^5.9
^Miⁿⁿ^e^s^o^t^a^3,047,000^178,500^5.9
^Mi^s^sⁱ^s^sⁱ^ppi^1,369,100^35,300^2.6
^Mi^s^s^o^u^rⁱ³^,083,300^125,200^4.1
^Mon^t^an^a^537,600^15,200^2.8
^N^e^bras^k^a^1,031,000^35,000^3.4
^N^e^v^a^da^1,188,100^54,600^4.6
^N^e^w^H^a^m^p^s^hⁱ^r^e^797,400^57,300^7.2
^N^e^w^Jers^ey^4,702,000^539,500^11.5
^N^e^w^Mexⁱ^co^911,200^34,500^3.8
^N^e^w^Y^o^rk^9,877,100^838,900^8.5
^N^o^rt^h^C^a^rolⁱⁿ^a⁴^,554,300^217,200^4.8
^N^o^rt^h^D^a^k^o^t^a^386,200^10,700^2.8
^O^hⁱ^o^5,811,500^286,900^4.9
^Ok^lah^o^m^a^1,816,400^54,700^3.0
^O^r^eg^on^1,895,700^95,300^5.0
^Penⁿ^s^y^l^v^aⁿⁱ^a⁶^,652,800^378,500^5.7
^R^h^{ode Is}^l^aⁿ^d^611,000^38,400^6.3
^S^o^u^t^h^C^a^rolⁱⁿ^a²^,189,600^79,000^3.6
^S^o^u^t^h^D^a^k^o^t^a^476,500^9,900^2.1
^T^eⁿⁿ^e^s^s^e^e³^,144,600^136,800^4.4
^T^e^x^a^s^10,657,000^663,100^6.2
^U^t^ah^1,250,800^49,600^4.0
^V^e^rm^on^t^415,800^15,800^3.8
^Vⁱ^rgⁱⁿⁱ^a^4,194,200^334,500^8.0

^Num^b^{er and s}^h^{are of covered w}^o^rk^ers^wⁱ^th
^T^o^{tal Num}^b^{er of}^{Social Security tax}^a^bl^{e earn}ⁱⁿ^gs^ab^{ove th}^e
^St^a^t^e^{covered w}^o^rk^ers^tax^a^{ble earnings}^bas^e
^wⁱ^{th Social Security}^a^Num^b^er^Percent
^tax^a^{ble earnings}^{of w}^o^rk^ers^{of w}^o^rk^ers
^Was^hⁱⁿ^g^t^on^3,316,600^219,800^6.6
^Wes^t^Vⁱ^rgⁱⁿⁱ^a^875,000^25,400^2.9
^Wi^s^c^on^sⁱⁿ³^,149,700^129,500^4.1
^Wy^omⁱⁿ^g^315,800^10,700^3.4
^Source:^Cu^sto^m^tab^u^latioⁿ^b^a^sed^oⁿ^th^{e Co}ⁿ^tin^u^o^u^s^W^o^r^k^Histo^r^y^Sam^p^{le Files. Data ex}^tr^acted^as
^of^Jan^u^a^ry^{2007. T}^a^bl^{e prov}ⁱ^d^{ed by}^S^S^A^{, O}^f^fⁱ^{ce of}^P^o^lⁱ^c^y^,^O^ffi^{ce of}^R^e^s^earch^{, Ev}^al^u^a^tⁱ^oⁿ^an^d
^Statistics
Table A-3. Number and Percentage of Workers
Above the Taxable Earnings Base of $87,900
by Type of Earnings and Sex, 2004
^{Percent of group}
^Num^b^er^a^Percent^{of grou}^p^ab^{ove th}^e
⁽ⁱ^{n t}^h^o^u^sa^nds)ⁱⁿ^total^tax^a^b^l^e
^ma^xⁱ^mu^m
^{All w}^o^rk^ers^9,449^100%^6%
^Men⁷^,358^78%^9%
^Wom^eⁿ²^,092^22%^3%
^{All w}^{age and s}^a^{lary w}^o^rk^ers^8,640^93%^6%
^Men⁶^,703^73%^9%
^Wom^eⁿ¹^,937^20%^3%
^{All self}^-^e^m^p^lo^y^e^d⁸⁰⁹^9%^5%
^Men⁶⁵⁵^7%^7%
^Wom^eⁿ¹⁵⁵^2%^2%
^Source:^So^{cial Secu}^r^ity^B^u^lletin^,^Annual^St^atⁱ^s^tⁱ^c^al^Suppl^em^ent^,²⁰⁰⁶^a^t^[^h^t^t^p^:^/^/^www.^s^s^a^.^g^o^v^/^p^o^lⁱ^c^y
^/^docs^/^s^t^at^com^p^s^/^s^u^ppl^em^en^t^/^{2006]. (C}^R^S^cal^cu^l^a^tⁱ^oⁿ^s^bas^e^{d on}^{2004 es}^tⁱ^m^at^es^f^r^om^t^a^bl^es^,
^{4.B1,4.B4, 4.B7, an}^{d 4B.9).}
^{a. W}^o^rk^ers^w^ith^earnⁱⁿ^g^sⁱⁿ^both^w^a^g^e^an^{d s}^a^lary^em^ploy^m^eⁿ^t^an^{d s}^e^lf^-^e^m^p^loy^m^en^{t are}^c^o^uⁿ^t^{ed in}
^each^ty^{pe of}^em^ploy^m^eⁿ^t^bu^{t on}^ly^on^{ce in}^th^{e total.}