Retirement Taxes
Social Security and Retirement Taxes
Overview:
Social Security and retirement taxes were $845 billion in FY2012 and made up 35% of all tax receipts of the Federal Government in that year. They were $948 billion in FY 2013 and 34% of the total tax receipts.
The source of these figures was from The Office of Management and Budget website, the historical figures page. The FY2013 figures from OMB are now finalized and the FY2014 figures are estimates and will not be finalized for some time.
Considerations:
These options have been discussed as potential steps in helping to solve the fiscal crisis as well as plugging the Social Security deficit.
- Subject all earned income to Social Security taxation as presently is the case with Medicare taxes. This reduces the Social Security shortfall by 98%.
- Subject earned income up to $218,100 in calendar year 2015 to Social Security taxation from $117,000 in calendar year 2014. This reduces the Social Security shortfall by 36%.
- Subject earned income up to $160,000 in calendar year 2015 to Social Security taxation from $117,000 in 2014. This reduces the Social Security shortfall by 16%.
- Raise the rate for the employee. Each .25 % increase in the rate reduces the Social Security shortfall by 11%.
- Raise the rate for both the employer and the employee. Each .25% increase reduces the Social Security shortfall by 22%.
- Remove the exemption of Social Security taxes on salary deferral or reduction plans. This proposal is unscored.
The estimates of the effect on the Social Security deficit are from the AARP.
Proposals:
- Simpson Bowles Plan
- Domenici Rivlin Plan
- AARP Plan
- Heritage Foundation Plan
- United We Stand Plan
United We Stand Plan:
- Subject earned income up to $218,100 to Social Security taxation in calendar year 2015 from $117,000 in calendar year 2014. This reduces the Social Security shortfall by 36%.
- Remove the exemption of Social Security taxes on salary deferral or reduction plans. This proposal is unscored.