Payroll Tax Cap

On January 1, the maximum amount of annual earnings subject to the Social Security tax increased to $113,700 (up from $110,100 last year). In response, Nicole Woo, Janelle Jones, and I have updated our estimates of the share of workers earning above the new “payroll tax cap.”

According to our analysis, which is based on earnings data from the American Community Survey (ACS) for 2011, about one in 20 U.S. workers have annual earnings that put them above the new, higher payroll tax cap. Our full report provides breakdowns by gender, race and ethnicity, age, and state of residence.

We also produced corresponding estimates of the share earning above $250,000 per year. (There have been proposals in Congress to apply the payroll tax to earnings above $250,000 per year, but not to earnings between the new $113,700 cap and $250,000.) Our data show that only about 1.3 percent of workers earn more that $250,000 per year.

One nice innovation in the updated report is that we’ve abandoned the pie chart that I complained about in an earlier post:

Pie chart showing share earning above payroll tax cap and $250,000

Source: CEPR, 2012.

For the new paper, we’ve gone with boxes instead:

Embedded box chart showing share earning above payroll tax and $250,000

Source: CEPR, 2013.

Much better.

Leave a Reply