The growth in Social Security benefits among the retirement-age population from increases in the cap on covered earnings.

TitleThe growth in Social Security benefits among the retirement-age population from increases in the cap on covered earnings.
Publication TypeJournal Article
Year of Publication2012
AuthorsGustman, AL, Steinmeier, TL, Tabatabai, N
JournalSoc Secur Bull
Volume72
Issue2
Pagination49-61
Date Published2012
ISSN Number0037-7910
KeywordsAged, Cohort Studies, Female, Humans, Insurance Benefits, Male, Middle Aged, Models, Econometric, Public Policy, Salaries and Fringe Benefits, Social Security, Taxes, United States
Abstract

Analysts have proposed raising the maximum level of earnings subject to the Social Security payroll tax (the "tax max") to improve long-term Social Security Trust Fund solvency. This article investigates how raising the tax max leads to the "leakage" of portions of the additional revenue into higher benefit payments. Using Health and Retirement Study data matched to Social Security earnings records, we compare historical payroll tax payments and benefit amounts for Early Boomers (born 1948-1953) with tax and benefit simulations had they been subject to the tax max (adjusted for wage growth) faced by cohorts 12 and 24 years older. We find that 43.2 percent of the additional payroll tax revenue attributable to tax max increases affecting Early Boomers relative to taxes paid by the cohort 12 years older leaked into higher benefits. For Early Boomers relative to those 24 years older, we find 53.5 percent leakage.

URLhttps://www.ssa.gov/policy/docs/ssb/v72n2/v72n2p49.html
User Guide Notes

http://www.ncbi.nlm.nih.gov/pubmed/22799138?dopt=Abstract

Endnote Keywords

Social security/payroll tax/Public policy/retirement planning/taxation

Endnote ID

69572

Alternate JournalSoc Secur Bull
Citation Key7736
PubMed ID22799138