Option 3 adds a second-tier tax, very high-wage workers would pay more than those at the first-tier taxable maximum. For very high-wage workers, the total payroll tax of $25,250 in 2050 under Option 3 would be almost twice as much as they would pay in 2010 under current law.

Option 4:
Payroll Tax Increases Only

Under this option, the benefit growth rates provided under current law are maintained by introducing three changes to taxes. First, the current Social Security payroll tax would be increased by raising both that tax’s cap and its rate. Currently, about 84 percent of all earnings in the economy are subject to the payroll tax; under this option, the cap on wages subject to this tax would be raised to about 90 percent, where it has been in the past.27 Second, the current payroll tax rate would be increased—on earnings up to its new maximum—rising in stages to a combined 14.7 percent in 2080. Third, this option would add a second-tier tax on covered earnings at all levels, which would begin at 2 percent in 2012 and rise to 5.5 percent in 2060. These changes would move Social Security taxation in a progressive direction.

Benefit Effects

Under this option, there would be no change to the benefit growth rates scheduled under current law. For the benefit levels and earnings replacement rates, see the bars for the current law in the figures above.

Payroll Tax

Sustaining the benefits scheduled under the current law will require substantially higher revenue from payroll taxes; see Figure 6-13. Adding a second-tier tax makes the increase much larger for those at higher earnings levels than at lower earnings levels. For example, for very high-wage workers, annual payments in 2050 would increase 109 percent, from $19,960 under current law to $41,608 under Option 4. These very high-wage workers to date have typically paid Social Security tax on just about one-half of their earnings. Contributions by those at average earning levels would increase far less, however.


Changes to make the Social Security program financially solvent are an essential element of a strategy to put the federal budget on a sustainable path. Restoring confidence in the program’s future is especially vital

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