Number: RL32896
Title: Social Security: Raising or Eliminating the Taxable Earnings Base
Authors: Debra B. Whitman and Janemarie Mulvey, Domestic Social Policy Division 
Abstract: Since the beginning of the program, Social Security taxes have been levied on covered earnings up to a maximum level set each year, referred to as the taxable earnings base. Social Security was enacted in 1935, and the Social Security payroll tax was first levied in 1937. From 1937 through 1949, the tax rate was 1% (on employee and employer, each) on earnings up to $3,000 a year. Since that time the rate has risen to 6.2% and the taxable earnings base has been increased to help meet the financing needs of the program, and to keep up to date with changing earnings levels. Since 1982, the Social Security earnings base has risen at the same rate as wages in the economy. By law the Commissioner of Social Security is required to raise the base whenever an automatic benefit increase - cost of living adjustment (COLA) - is granted to Social Security recipients, assuming wages have risen. The increase in the base from $97,500 in 2007 to $102,000 in 2008 is based on the increase in average wages from 2005 to 2006.
Pages: 23
Date: June 5, 2008