Increasing the Social Security Payroll Tax Base: Options and Effects on Tax Burdens
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Shop Donate Submit. Leaks News About Partners. Jump to: navigation , search. For example, one analyst suggested reducing the payroll tax rate and keeping it revenue-neutral by raising the maximum taxable limit. The tax rate under current law on covered earnings is Half of the tax rate is paid by the employee and the other half by the employer; the self-employed are responsible for the entire amount.
The Medicare tax rate applies to all covered earnings. The Social Security Trustees project that the assets in the two Social Security trust funds will be exhausted in , and after that, Social Security payroll tax revenue will cover about three- quarters of promised benefits. Although most analysts advocate raising the maximum taxable limit to increase revenues for the Social Security program, some would use the increased revenues for other purposes.
For example, one analyst suggested reducing the payroll tax rate and keeping it revenue-neutral by raising the maximum taxable limit. This change would provide payroll tax relief to low- and middle- income workers. This report examines changes in the distribution of the tax burden of four policies involving raising the Social Security maximum taxable limit.
When you start receiving Social Security retirement or disability benefits, other family members may also be eligible for payments. For example, benefits can be paid to your spouse:. Under certain circumstances, we can also pay benefits to a stepchild, grandchild, step-grandchild, or an adopted child. If you become the parent of a child after you begin receiving benefits, let us know about the child, so we can decide if the child is eligible for benefits. From until , Social Security was to pay benefits to retirees in the form of a single, lump-sum refund payment.
Under the law, monthly benefits were to start in The earliest reported applicant for a lump-sum refund was a retired Cleveland motorman named Ernest Ackerman, who retired one day after the Social Security program began.
During his one day of participation in the program, a nickel was withheld from Mr. You also will need other savings, investments, pensions or retirement accounts to make sure you have enough money to live comfortably when you retire. The amount of your average wages that Social Security retirement benefits replaces varies depending on your earnings and when you choose to start benefits. If you start benefits after full retirement age, these percentages would be higher.
If you start benefits earlier, these percentages would be lower. Most financial advisers say you will need about 70 percent of pre-retirement income to live comfortably in retirement, including your Social Security benefits, investments, and personal savings.
Each family member may be eligible for a monthly benefit that is up to half of your retirement or disability benefit amount. However, there is a limit to the total amount of money that can be paid to you and your family.
The limit varies, but is generally equal to about to percent of your retirement or disability benefit. Additionally, your parents can receive benefits on your earnings if they were dependent on you for at least half of their support. This benefit may be paid to your spouse or minor children if they meet certain requirements.
They must:. Your survivors receive a percentage of your basic Social Security benefit—usually in a range from 75 to percent each.
A Bill to Fix Social Security (by increasing taxes)
However, there is a limit to the amount of money that can be paid each month to a family. How do I meet the earnings requirement for disability benefits? In general, to get disability benefits, you must meet two different earnings tests:. A duration of work test to show that you worked long enough under Social Security. The following table shows the rules for how much work you need for the recent work test, based on your age when your disability began.
The U.S. Tax Burden on Labor, 12222
We base the rules in this table on the calendar quarter in which you turned or will turn a certain age. Work during half the time for the period beginning with the quarter after you turned 21 and ending with the quarter you became disabled. Example: If you become disabled in the quarter you turned age 27, then you would need three years of work out of the six-year period ending with the quarter you became disabled.
Section d 1 of the Social Security Act defines disability as an—. A inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, or. B in the case of an individual who has attained the age of 55 and is blind within the meaning of blindness as defined in section i 1 , inability by reason of such blindness to engage in substantial gainful activity requiring skills or abilities comparable to those of any gainful activity in which the individual has previously engaged with some regularity and over a substantial period of time.
In most cases, a dollar amount is used to indicate whether a person is engaging in substantial gainful activity SGA. Effective January , the SGA level is adjusted annually on the basis of the national average wage index. In four states, they represented less than 3 percent of the state population. The states with the highest rates of disabled beneficiaries—7 percent or more—were Alabama, Arkansas, Kentucky, Maine, Mississippi, and West Virginia. The majority We will mail fewer paper Social Security Statements. By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government.
Such securities are available only to the trust funds. Last updated September 24, The Treasury securities issued to the public and to the Government Trust Funds intragovernmental holdings then become part of the total debt.
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Such investments may be made only in interest-bearing obligations of the United States or in obligations guaranteed as to both principal and interest by the United States. Census Bureau, November The Trustees project that cost will continue to exceed non-interest income throughout the year valuation period. Last reviewed or modified August 5, This graph ends in For the years beyond this, see the following excerpt from the same report. Through the infinite horizon, the unfunded obligation, or shortfall, is equivalent to 4.
Transmitted to Just Facts on September 16, The open-group valuation includes non-interest income and cost for past, current, and future participants through the year Unfunded Obligation. A measure of the shortfall of trust fund income to fully cover program cost through a specified date after depletion of trust fund asset reserves. This measure can be expressed in present value dollars, discounted to the beginning of the valuation period, by computing the excess of the present value of the projected cost of the program through a specified date over the sum of: 1 the value of trust fund reserves at the beginning of the valuation period; and 2 the present value of the projected non-interest income of the program through a specified date, assuming scheduled tax rates and benefit levels.
This measure can apply for all participants through a specified date, i. To create a present value, future amounts are thus reduced using an assumed interest rate, and those reduced amounts are summed. The resulting present value is the amount that would have to be put in the bank today at the assumed interest rate to fund the future cash flows. Department of the Treasury, March 28, This measure is computed like the open group unfunded obligation except that individuals under the age of 15 or not yet born are excluded.
In other words, only persons who attain age 15 or older during the first year of the projection period are included in the calculations.
Department of the Treasury, To calculate a present value, future amounts are thus reduced using an assumed interest rate, and those reduced amounts are summed. For the Medicare projections, current participants are at least 18 years of age at the beginning of the projection period. Seitzinger, Marie B.
Morris, and Mark Jickling. Among the disclosures of publicly traded companies are accounting statements. Since financial information is of little use to investors unless all firms use comparable accounting methods, the securities laws give the Securities and Exchange Commission broad authority to establish standards for financial reporting. The SEC has delegated the task of writing accounting standards to private sector bodies, and since the Financial Accounting Standards Board has been charged with formulating accounting and financial reporting standards.
The Board believes that measurement of the obligation and accrual of the cost based on best estimates are superior to implying, by a failure to accrue, that no obligation exists prior to the payment of benefits. This Statement relies on a basic premise of generally accepted accounting principles that accrual accounting provides more relevant and useful information than does cash basis accounting. By Richard Luecke and Samuel L.
Harvard Business School Press, In contrast to cash-basis accounting, accrual accounting records transactions as they are made, whether or not the cash has actually changed hands.