Should the Cap on Social Security Payroll Taxes Be Lifted?
Oct 18, · The maximum amount of earnings subject to the Social Security tax (taxable maximum) increasedto $, from $, as of January , the U.S. Social Security . You may then end up with total Social Security taxes withheld that exceed the maximum. When you file your tax return the following year, you can claim a refund from the IRS for Social Security taxes withheld that exceeded the maximum amount. Maximum Taxable Earnings Each Year. Year Amount; $, $, $,
According to the Congressional Budget Office, raising the federal retirement age to 70 would solve about half of the Social Security funding problem, while lifting the payroll tax cap would solve all of it. There is a good deal of concern, and much discussion, about entitlement changes.
Regarding Social Security, in particular, should the full retirement foor be raised to 70? Maybe a better idea would be to raise the earnings cap aka: tax max for paying Social Security taxes. This idea seems to be more in favor than raising the retirement age. However, like so many other ideas that look pretty good, it has a down side.
What is the down side? What is the impact? Lifting the cap on contributions to Social Security would simultaneously lift the cap on how much salary is included for calculation of the retirement benefit, or Primary Insurance Amount PIA. Social Security commissioned an interesting study on leakageby three outside professors. A primary finding of the study is that even with the leakage, raising the tax cap would what is the social security tax cap for 2013 result in a reduction of the SSA deficit, long-term.
Calculation of the PIA benefit favors low earners. High earners get a lower percentage. Cap lift example. Employee has been a high what color are nits when they are dead for 34 years. Raising the earnings tax what is the social security tax cap for 2013 increases revenue for the fund significantly, even though the employee receives a higher benefit.
The high earners get something for their increased contributions, garage sale how to price the return is less generous than at the lower levels. Greater income for the fund means greater solvency for the Social Security program, which is what policy makers — and the rest of us — want. However, questions remain. Should there be no earnings cap at all? Or should it be raised significantly? It would seem there should be some kind of upper limit.
This foe rule out extreme situations, like high earners who make, say, k or more per year and who would receive disproportionately large benefits out of line with Social Security intentions. At the same time, however, it would mean high earners would receive no return at all for their higher contributions.
As a practical matter, this could be a real problem. How much would socoal the cap save? Due to complexity, uncertainty, and variability, this is quite difficult to calculate precisely. But, as the Social Security professors study points out, there is no question among authorities that this initiative would be a net benefit to the fund:. To be sure, our estimates of the securitj of leakage of additional taxes into benefits are bracketed by the estimates of the CBO and CRS.
However, the differences are substantial, with the CBO estimate of leakage at about one-third, the CRS estimate at about two-thirds, and ours falling between, at roughly one-half. In conclusion, despite leakage, and the unanswered questions, lifting or removing the earnings cap definitely appears to be a worthwhile securiry change for improving the health of Social Security. Robert Benson served 35 years in various Federal agencies, as both a management analyst and IT specialist.
He is a graduate of Northwestern University. Save my name, email, and website in this browser shat the next time I comment. The Washington Post Oct 15, All rights reserved. This article may not be reproduced without express written consent from Robert F.
About the Author Robert Benson served 35 years in various Federal agencies, as both a management analyst and IT specialist.
Contribution and Benefit Base
54 rows · Listed below are the maximum taxable earnings for Social Security by year from to the present. Year Maximum Taxable Earnings $3, $3, $4, $4, $6, $7, $9, $10, $13, $14, $15, $16, $17, $22, $25, $29, . Tax data. Wage-indexed amounts. Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) program limits the amount of earnings subject to taxation for a given year. The same annual limit also applies when those earnings are used in a benefit computation. automatic adjustment provisions of the Social Security Act. Before , the tax rate on self employed persons was less than the combined tax rate on employers and employees. For , and , the upper limits on earnings subject to HI taxes were $,, $, and $, respectively.
Listed below are the maximum taxable earnings for Social Security by year from to the present. Blankenship Financial Planning, Ltd. Jim provides expert guidance for your Retirement, Education Funding, and Income Tax issues and concerns. Several other sites also republish his work.
See below for more on the books. Sterling is also an adjunct professor teaching courses in math, finance, investments and insurance. This manual is available on Amazon at this link. Social Security for the Suddenly Single can be found on Amazon at this link.
This book is narrowly-focused on divorcee Social Security strategies and rules. It is also available in a Kindle version. The book is also available on Kindle, which you can find at this Kindle version link. Click the link to choose the paperback version , or the Kindle version.
Click this link for the Amazon ordering page. A WordPress theme by Ravi Varma. Social Security Maximum Taxable Earnings. Like this: Like Loading Subscribe to our Feed via RSS. Downside to the Age 55 Rule for k. Subscribe to this blog by Email!