Raising or Scrapping Social Security Payroll Tax Cap
On New Year’s Day, the cap on the Social Security payroll tax increased to $118,500 per year (up from $117,000 in 2014). Workers pay Social Security tax until their annual earnings reach the cap and then pay no additional Social Security tax after that (until the following year, when the clock restarts).
One way to increase revenues available to Social Security would be to raise or eliminate the cap. In a report out today, my CEPR colleagues, Nicole Woo, Cherrie Bucknor, and I use data from the American Community Survey (ACS) to estimate how many workers would be affected if we raised the cap to $250,000, $400,000, or just eliminated the cap altogether.
According to our analysis of the ACS data, about 6.1 percent of all workers have earnings from work in excess of the new cap; about 1.5 percent earn more than $250,000 per year; and about 0.7 percent are above $400,000.
The report includes tables with breakdowns by race, gender, age, and state.