RSSMaximum Earnings Subject to Social Security Tax 1937 – 2008
The Social Security tax is composed of two variables: (1) a maximum amount of annual earnings subject to taxation; and (2) the tax rate. This chart illustrates the increase in the maximum amount of earnings since Social Security taxes were first collected in 1937. At that time, the maximum amount of annual earnings subject to a tax rate of 1% was $3,000. Thus, the maximum contribution by an individual to the Social Security program was $30 per year. These amounts remained the same until 1950 when the rate on the first $3,000 of earnings was increased to 1.5%.
Legislation was passed in 1972 to provide annual increases in Social Security benefits beginning in 1975 to offset the effects of inflation on fixed incomes. These increases, now known as Cost-of-Living Allowances (COLAs) are financed by adjusting the maximum earnings subject to taxation. These increases are illustrated in this chart.
5 Responses to “Maximum Earnings Subject to Social Security Tax 1937 – 2008”
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June 16th, 2008 at 6:58 pm
we need to get rid of this ridiculous cap on SS taxes. There is no reason a person making 10 million dollars pay as little as a person earning 200k. Its not as if doing that is going to affect growth, as the rich will still have a wealth of money, and the government will be more solvent as well.
June 17th, 2008 at 1:27 pm
The issue with Social security (not Medicare) is that I will never recoup the money I put into the program, and I’m not counting what my employers have paid. Lets analize this in base line dollars (using 2007 as the base):
I earn over the cap (not by much), and at the expected retirement age of 67, I will get a projected 1600 per month or 19200 per year (I could get 1200 at age 62) . So far I have paid over 80K into the program (and my employer had matched that). I expect to work for another 25 years and I will most likely put in at least the same amount, or another 80K. So just on my own I will have placed into to the broken system, 160K with matching contributions from my employers of 160K, for a total of 320K. At the pay back rate of 20K per year, I will need to live to the ripe old age of 83. If I had invested the same money I would have over $1M to draw from.
This is a broken system and it is not sustainable, lets fix it and not keep throwing good money after bad money!
July 22nd, 2008 at 12:00 am
Please add a chart that shows what the trust fund value would be today if congress had never borrowed money from the trust fund.
Interesting dates and facts:
April 19, 1935 The Social Security Bill (H.R. 7260) was passed by the House of Representatives, 372 to 33 (25 not voting). Against were 13 Democrats, 18 Republicans and 2 Farm Labor.
January 1, 1940 Monthly benefits first became payable under old-age and survivor’s insurance to aged retired workers and their dependents and to survivors of deceased insured workers. The Federal Old-Age and Survivors Insurance Trust Fund was established as a separate account in the United States Treasury to hold the amounts accumulated under the old-age and survivors insurance program. Basic provisions for hearing and review instituted by the Social Security Board under authority to establish procedures, hold hearings, and take testimony in relation to determination of rights to old-age and survivors insurance benefits (Office of Appeals Council).
June 22, 1959 The Social Security Administration’s trustees reported to Congress that the Old-age and Survivors Insurance Trust Fund would run an $87 million deficit for fiscal 1960. The trustees said, however, that the 1960 deficit would be the last in the foreseeable future because of increased income expected from Social Security tax raises voted by Congress in 1958.
December 20, 1977 The Social Security Amendments of 1977 were signed by President Carter. This legislation was designed to restore the financial soundness of the Social Security system into the 21st century, and making future benefits and costs much more predictable.
December 16, 1981 President Reagan promulgated Executive Order 12335, which established the National Commission on Social Security Reform. The Commission was created as a result of the continuing deterioration of the financial position of the Old-Age and Survivors Trust Fund and to made recommendations to assure the financial integrity of the Social Security System.
April 3, 1995 The 1995 Trustees Report showed the date of the combined OASDI Trust Funds exhaustion as 2030, a gain of one year from the year before.
June 7, 1996 Termination notices began going out to 220,000 Social Security and SSI disability beneficiaries who were receiving benefits due to drug addiction or alcoholism. Under the law, these benefits were to be stopped by January 1, 1997.
January 27, 1998 In his State of the Union address President Clinton emphasized the central task of addressing the solvency of the Social Security program. He stated his view that any budget surplus should not be used in any way until we “Save Social Security First.”
April 28, 1998 The 1998 Trustees Report is released, showing an improvement in the long-range financing projections. The date of Trust Fund exhaustion moves from 2029 to 2032.
March 3, 1999 House of Representatives passed H.R. Res. 32, a sense of Congress resolution, by a vote of 416 to 1. This non-binding resolution puts the House on record as supporting an initiative to strengthen and protect the Social Security program for the 21st century.
August 31, 2000 Based on data from the Bureau of the Public Debt, the invested assets of the combined OASI and DI Trust Funds passed the trillion dollar mark, at $1,001,712,600.
March 17, 2003 Social Security Trustees released their 2003 Report, showing that the program will encounter a negative cash-flow in 2018 and the Trust Funds will be depleted in 2042.
July 22nd, 2008 at 9:43 am
tothestars,
Thank you for your suggestion about a chart showing the balance in the Social Security Trust fund had Congress not “borrowed” the money that was left each year after benefits were paid out to retirees. Actually, the answer is rather strightforward and contained each year in the Annual Report of the Social Security Board of Trustees. The amount is $2.239 trillion as of the end of 2007. Although this single number alone would not make a very interesting chart, you have given us an idea for a chart that shows how this balance has accumulated over time. We will put together some data, and publish a chart shortly. Thanks for the idea. And thanks for the interesting history of the Social Security program.
July 24th, 2008 at 9:14 am
The retirement system of this country was based on traditional pensions/insurance from employers… Since these have mostly been cancelled, more and more of the burden is going to fall on Social Security/Medicare. That is one of the many payoffs from “FREE”/Global trade. I hope the 20$ DVD players were worth it!
Taxes are going to go up and social programs are going to be increased and in the case of health care.. created. This is the trade off for the cheap junk coming from the third world. The shift of burden of our society’s safety net has gone from the businesses to the populace. Good or bad.. It’s kind of ironic .. because Republican policies are driving this country towards needing more social programs.
If you make the working class poor, you’re going to have more welfare spending. Alternatively, we can switch to being a poor third world country..our debt would be evidence of that .. in a sense… that is the direciton we are moving towards. If 85% of the jobs in this country don’t require a degree, it doesn’t seem to be very smart to allow your work to be outsourced to places with few regulations… It appears to be a surefire way to reduce wages and benefits in this country…This seems a bit self defeating unless you happen to not be in the working class…It appears that….to the benefit of the few, we are reducing the pay and benefits of the many.