To: Mark Mandel who wrote (227403 ) 7/8/2013 2:30:50 PM From: Sam Respond to these guys do:ssa.gov The Evolution of Social Security's Taxable Maximum Summary 1 This taxable maximum (or "tax max") increases annually, according to growth in the national average wage index. 2 However, Social Security's projected funding shortfall has led some policymakers to propose increasing the tax max beyond the indexed levels to help restore financial balance. This brief does not take any position for or against modifying the tax max; instead it provides context for the Social Security reform debate by summarizing the changes that have occurred in the tax max and covered earnings since 1937. Major Findings The tax max has been in place since Social Security's founding, but Congress has modified it over time to address several policy goals, such as improving system financing and maintaining meaningful benefits for middle and higher earners. Although the nominal value of the tax max has grown from $3,000 in 1937 to $106,800 today, in inflation-adjusted dollars the tax max declined from 1937 until the late 1960s, and then grew once it was indexed to wage growth in 1975. In wage-adjusted dollars, the tax max has remained roughly constant since the mid-1980s. The percentage of workers with earnings above the tax max ("above-max earners") fell from 15 percent in 1975 to about 6 percent in 1983 and has remained at that level since. Historically, an average of roughly 83 percent of covered earnings have been subject to the payroll tax. In 1983, this figure reached 90 percent, but it has declined since then. As of 2010, about 86 percent of covered earnings fall under the tax max. The percentage of earnings covered by the tax max has fallen since the early 1980s because earnings among above-max earners have grown faster than earnings among the rest of the working population.
