Congressional Budget Office: 'Options for Reducing the Deficit, 2023 to 2032-Volume I – Larger Reductions' (Part 6 of 10)

WASHINGTON, Dec. 21 (TNSrep) -- The Congressional Budget Office issued the following report on Dec. 7, 2022, entitled "Options for Reducing the Deficit, 2023 to 2032--Volume I: Larger Reductions."

Here are excerpts:

(Continued from Part 5 of 10)

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Option 8: Mandatory Spending - Set Social Security Benefits to a Flat Amount

Background

Social Security is the largest single program in the federal government's budget. It comprises two parts: Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI). OASI pays benefits to retired workers, their eligible dependents, and some survivors of deceased workers. DI pays benefits to disabled workers and their dependents until those workers are old enough to claim full retirement benefits under OASI.

To be eligible for Social Security benefits, a worker is required to have a sufficient history of earnings in employment subject to Social Security payroll taxes. Benefits for retired and disabled workers are based on past earnings. In particular, benefits are based on average indexed monthly earnings (AIME), a measure of taxable earnings over a worker's lifetime. In the computation of AIME, past taxable earnings are indexed using the average wage indexing series (AWI) to reflect the general rise in average wages in the economy that tends to occur over time. A progressive formula is then applied to the AIME to compute the primary insurance amount (PIA), an amount that is a key determinant of a worker's initial benefit. The progressive formula means that benefits replace a higher percentage of earnings for workers with lower earnings than for workers with higher earnings. In years after initial eligibility, a cost-of-living adjustment (COLA) is applied to the PIA to reflect annual growth in consumer prices. In September 2022, the average monthly benefit was $1,674 for retired workers and $1,363 for disabled workers.

For retired-worker beneficiaries, initial benefits depend on the age at which a recipient chooses to start claiming them. Those who claim benefits at their full retirement age (FRA), also called the normal retirement age, receive a benefit equal to their PIA. (The FRA varies by the year of birth of the worker and is 67 for workers who turn 62 in 2022 or later.) Retired-worker beneficiaries are eligible to begin receiving benefits when they turn 62. Those who claim benefits before their FRA receive a benefit that is smaller than their PIA, and those who claim after their FRA receive a benefit that is larger than their PIA. (That permanent increase in monthly benefits is called the delayed retirement credit.) For example, for workers with an FRA of 67, monthly benefits are 70 percent of the PIA for those who claim benefits at the age of 62 and 124 per- cent of the PIA for people who wait until age 70 to claim. (There are no additional benefit increases if people claim benefits after age 70.)

Benefits for eligible dependents and survivors of retired and disabled workers are based on the worker's PIA and may also be adjusted on the basis of the age at which benefits are claimed and other factors. Before any adjustments, a dependent spouse, a child of a retired worker, or a child of a disabled worker receives 50 percent of the worker's PIA. A child of a deceased worker receives 75 percent of the worker's PIA. A widow or widower receives 100 percent of the worker's PIA.

Under this option, the PIA for all retired or disabled workers would be the same; that amount would no longer depend on past earnings. Workers with high lifetime incomes would see reductions in benefits under this option compared with the benefits scheduled under current law. Some workers with low lifetime earnings would receive larger benefits than are scheduled under current law.

Key Design Choices

Several key design choices about a new flat benefit would have to be made, including the following:

* Where to set the new benefit level;

* What eligibility requirements to use for the benefit;

* Whether to retain claiming-age adjustments; and

* What benefits to provide for dependents and survivors.

Benefit Level. The amount of the flat benefit would have important implications for workers' benefits and the budgetary effect of the option. The size of the reduction in Social Security spending would depend on the benefit amount under this option relative to the average benefit under current law. The smaller the new flat benefit, the larger the resulting savings and the more beneficiaries who would face a benefit reduction relative to benefits scheduled under current law.

Eligibility Requirements. Whether to require earnings in employment subject to Social Security payroll taxes to be eligible for the flat benefit would affect the number of beneficiaries under this option. Keeping the same eligibility requirements as under current law would not change the population eligible to receive benefits. Waiving any requirement for an earnings history to receive the flat benefit would result in more beneficiaries than under current law, which would reduce the savings from the option.

Claiming-Age Adjustments. Under current law, retired- worker beneficiaries can claim benefits before their FRA, but their benefits are reduced. Eliminating that reduction would lead to beneficiaries claiming earlier than if they were only allowed to claim their full benefits at their FRA. It would therefore reduce savings from the option. In addition, eliminating the benefit reduction for early claiming would discourage work.

Under current law, retired-worker beneficiaries can receive benefit increases when they delay claiming after their FRA. Eliminating the delayed retirement credit would increase long-term savings from the option but would discourage work.

Benefits for Dependents. Maintaining dependent and survivor benefits would mean that Social Security would continue to provide financial support to family members of worker beneficiaries. However, the reduction in Social Security outlays would be larger if those benefits were not provided.

Option

This option consists of two alternatives, both of which would take effect in January 2024. Under both alternatives, in any given year, Social Security benefits for all newly eligible beneficiaries at their full retirement age would be the same-an amount that would be deter- mined relative to the federal poverty guidelines (commonly known as the federal poverty level, or FPL) for a single person. The FPL is $1,133 per month in 2022.

The FPL is adjusted annually using the consumer price index for all urban consumers (CPI-U). In both alternatives, the initial benefit amount for workers who became eligible for Social Security would also be adjusted using the CPI-U instead of the AWI; after 2024, initial benefits would increase for newly eligible beneficiaries each year, but those increases would be smaller than under current law.

For both alternatives, eligibility criteria for Social Security benefits and adjustments to benefit levels for early and delayed claiming would remain unchanged from current law, and all disabled workers would be eligible for the flat dollar benefit upon entitlement. Additionally, both alternatives would provide benefits to dependents and survivors as under current law.

* Under the first alternative, the flat benefit amount would be set to 150 percent of the FPL, which would equal about $1,770 per month in calendar year 2024.

* Under the second alternative, the flat benefit amount would be set to 125 percent of the FPL, equaling about $1,480 per month in calendar year 2024.

For people with low earnings, benefits under this option would be greater than they would be under current law and would remain so for future cohorts in the coming decade, even though initial benefits would grow more slowly than under current law. For high earners who became eligible after the policy was implemented, a flat benefit amount set at 150 percent or 125 percent of the FPL would be smaller than what workers with comparable earnings histories would receive under current law, on the basis of their past earnings.

Effects on the Budget

If implemented, the first alternative would reduce Social Security outlays by a total of $270 billion through 2032, according to estimates by the Congressional Budget Office. The second alternative would reduce Social Security outlays by a total of $593 billion through 2032. Under current law, the benefits that retired or disabled workers initially receive are indexed to the AWI, so average new benefits grow at the same rate as average economywide wages. Under this option, the flat benefits received at the FRA for each successive cohort would grow with prices, as measured by changes in the CPI-U, which tends to grow more slowly than average earnings. As a result, the estimated savings would depend in part on the projected growth of average real wages. In CBO's projections, average real wages grow by 1.1 percent annually, which indicates the reduction in the annual growth rate of new benefits under this option relative to that under current law.

The savings from such changes would depend on the amount of the flat benefit relative to PIAs under current law. If the benefit amount was set to an amount that is higher than the average under current law, a flat benefit would result in additional Social Security spending. Conversely, if the benefit amount was set to an amount lower than the average under current law, the flat benefit would yield budgetary savings. It would also lower the beneficiaries' income.

The increases or decreases in Social Security benefits and income would affect some beneficiaries' eligibility for, and benefits from, means-tested programs, such as Supplemental Security Income (SSI) and the Supplemental Nutrition Assistance Program (SNAP). Some people would collect larger Social Security payments and would, as a result, receive fewer benefits from those programs; others, whose Social Security benefits would be smaller, might receive more benefits from means-tested programs. The estimates for this option do not include effects on programs other than Social Security.

Uncertainty About the Budgetary Effects

The overall savings from this option could be larger or smaller than shown for at least two reasons. First, savings might differ from those projected here because average real wages could evolve differently than CBO currently projects. Second, the estimates of savings rely on a projection about when Social Security beneficiaries claim their benefits. If the option induced beneficiaries to change when they claimed benefits, the short-term reductions in Social Security outlays could be very different than projected because the number of beneficiaries would change.

Changes in when people began claiming benefits would not change their lifetime benefits significantly, and the uncertainty about those changes matters more in the short term than in the long term. People who claim before their FRA receive less than their full benefit amount but collect benefits for a longer time until they die, and people who claim after their FRA receive larger benefits because of the delayed retirement credit but collect benefits for fewer years.

Long-Term Effects

Annual savings from both alternatives would continue to grow after 2032 as the new benefit structure applied to more beneficiaries and as average new benefits grew more slowly than they would under current law. The savings would continue to grow even after the new benefit structure applied to all beneficiaries as the effect of slower benefit growth compounded each year.

The first alternative would reduce Social Security out- lays by 4 percent in 2032, by 14 percent in 2042, and by 23 percent in 2052 from what would be scheduled to occur under current law, CBO estimates. When measured as a percentage of total economic output, the program's outlays would total 5.3 percent of gross domestic product (GDP) in 2042 and 4.9 percent of GDP in 2052, amounts that are 0.8 percentage points and 1.4 percentage points, respectively, lower than CBO projects under current law for those years.

Those projections reflect the assumption that Social Security will continue to pay benefits as scheduled under current law, regardless of the status of the program's trust funds. CBO projects that, combined, the Social Security trust funds will be exhausted in calendar year 2033. Beyond that point, trust fund balances would no longer be available to make up the gap between benefits specified in current law and annual trust fund receipts. If CBO were to analyze a scenario in which benefits were limited to the amounts payable from dedicated funding sources after trust fund exhaustion, those payable benefits would be smaller than scheduled benefits beginning in 2034.

Under the second alternative, Social Security outlays would be lower by 8 percent in 2032, by 22 percent in 2042, and by 33 percent in 2052 than what would be scheduled to occur under current law. Measured as a percentage of GDP, Social Security's outlays under the second alternative would be 1.4 percentage points lower in 2042 and 2.1 percentage points lower in 2052 than the agency currently projects under current law. As in the first alternative, those changes to Social Security outlays would be smaller if analyzed on a payable benefits basis.

Both alternatives would affect measures of Social Security's sustainability as well. The program has both dedicated revenue sources (in the form of payroll taxes paid by employees, employers, and self-employed people and income taxes on benefits) and trust funds. The sustainability of a program with those features is often measured by its estimated actuarial balance, which is the sum of the present value of annual income over a given period and the initial balance in the trust fund for that period, minus the sum of the present value of annual outlays over that period and the present value of a year's worth of benefits at the end of the period. For Social Security, that difference is traditionally presented as a percentage of the present value of taxable payroll or GDP over 75 years. A present value is a single number that expresses a flow of past and future income (in the form of tax revenues and other income) or payments (in the form of benefits and other outlays) in terms of an equivalent lump sum received or paid at a specific time. The value depends on the rate of interest, known as the discount rate, used to translate past and future cash flows into current dollars at that time.

The Social Security program is currently projected to have a negative actuarial balance (or an actuarial short- fall) over 75 years. Estimates of the actuarial balance do not account for revenues or outlays after that period. Under current law, outlays are projected to be larger than revenues at the end of that period, and the difference would grow thereafter, resulting in an increasing deficit for the trust funds after the 75th year.

Both alternatives would improve the 75-year actuarial balance. Under the first alternative, the actuarial shortfall would decline to 0.2 percent of GDP (an 88 percent improvement compared with an actuarial shortfall of 1.7 percent of GDP under current law), and Social Security tax revenues would exceed outlays by increasing amounts in the 2070s, leading to a growing surplus for the trust funds. That surplus would continue after the 75th year.

Under the second alternative, Social Security tax revenues would exceed outlays by increasing amounts starting around the 2050s, resulting in a growing annual surplus for the trust funds. As a result, the 75-year actuarial balance would be a positive 0.3 percent of GDP, compared with a negative 1.7 percent of GDP under current law. After the 75th year, under that alternative, outlays would continue to decline as a percentage of GDP, and the surplus would continue to rise.

Another common measure of Social Security's sustain- ability is the trust fund's date of exhaustion-the year in which its balance will reach zero. In CBO's projections, the combined Old-Age, Survivors, and Disability Insurance trust funds are exhausted in calendar year 2033. The first alternative would delay the combined trust funds' projected exhaustion date by two years. Under the second alternative, the combined trust funds would be exhausted in 2038, five years later than the projected exhaustion date under current law. However, under the second alternative, the trust funds' income would rise above the scheduled benefits later in the projection period. If scheduled benefits were paid in full throughout the period, as assumed for this analysis, and the trust funds operated with temporarily negative bal- ances, the annual surpluses later in the projection period would result in a positive trust fund balance again in the 2060s.

Distributional Effects

Setting Social Security benefits to a flat amount would not affect all recipients equally. For instance, Disability Insurance beneficiaries tend to have smaller benefits, on average, than Old-Age Insurance (OAI) beneficiaries, so benefits would increase by more and for a larger share of DI beneficiaries than for OAI beneficiaries. This discussion focuses on two ways to examine the distributional effects of a change in Social Security benefits. One is to evaluate how the fully implemented changes would affect the distribution of household income in a given year. The other is to estimate the changes to the benefits people receive over their lifetime and how that would vary along the distribution of lifetime household earnings (see the table on the next page).

In a given year after implementation, both alternatives would tend to increase income after transfers and taxes for households with low income and to reduce such income for households with high income, when com- pared with incomes under current law. Most Social Security beneficiaries are age 65 or older. In CBO's baseline distribution of household income after transfers and taxes, income includes Social Security benefits. As a result, people in that age group are slightly more likely than others to be in higher-income households. Moreover, within that group, both alternatives described here would tend to increase benefits and income after taxes and transfers for lower-income beneficiaries and reduce benefits and income after taxes and transfers for higher-income beneficiaries.

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Changes to Social Security Benefits Relative to Earnings for Different Groups If Benefits Were Set to a Flat Amount

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The second alternative would provide a smaller benefit amount than the first alternative. Thus, it would increase income after transfers and taxes for fewer beneficiaries and by less than the first alternative would, and it would reduce income after transfers and taxes by more and for a larger number of beneficiaries than the first alternative would.

The Social Security program, on net, is progressive: the benefits received from the system measured relative to taxes paid into the system over a person's lifetime tend to be higher for lower-income households than for higher-income households. This option would increase that progressivity.

When considered in isolation, the Social Security tax is regressive-that is, people with higher earnings (in particular, those with earnings above the taxable maximum) pay a smaller percentage of their total earnings in payroll taxes than those with lower earnings. However, the regressivity of the Social Security tax is counterbalanced by the progressivity of Social Security benefits: People with lower earnings during their lifetime tend to receive a larger share of their earnings in benefits over their lifetime. Two factors contribute to the progressivity of benefits. One, the benefit formula replaces a larger share of earnings for people with lower lifetime earnings and, two, people with low lifetime earnings are more likely than average to receive disability benefits. Those factors are partially offset by the fact that people with higher lifetime earnings tend to live longer than average, which means that they collect retired-worker benefits for more years.

This option would increase the progressivity of the program over the course of a person's lifetime because it would increase benefits for people with relatively low lifetime earnings and decrease benefits for those with higher lifetime earnings. CBO expects that, under both alternatives, the ratio of average lifetime benefits to average lifetime earnings would be higher than or roughly the same as under current law for people in the lowest quintile of the lifetime household earnings distribution. (Lifetime benefits in this analysis include the present value of all Social Security benefits except those received by young widows, young spouses, and children. The values of benefits are net of income taxes that some recipients pay on their benefits.)

For example, for such people born in the 1970s and 1980s, that measure would increase by about one-third under the first alternative and by 12 percent to 14 percent under the second one. For people in the middle and highest quintiles of the earnings distribution, that ratio would be lower under both alternatives than under current law, and the reduction relative to current law in lifetime benefits as a percentage of lifetime earnings would be larger for people born later than for those born earlier. That is because benefits would grow more slowly over time under this option than under current law for each successive cohort of beneficiaries.

Benefits would be smaller under the second alternative than under the first alternative. Thus, under the second alternative, low earners would receive a smaller benefit increase and relatively higher earners would face larger benefit reductions compared with current law than they would under the first alternative.

Economic Effects

In addition to having the behavioral effects reflected in conventional budget estimates, such as the ones shown above, setting Social Security benefits to a flat amount could affect the labor supply of Social Security beneficiaries. Because additional work would no longer result in larger benefits by increasing the taxable earnings that could be counted in the calculation of the PIA (as it does in some cases under current law), people might have less incentive to work under this option. However, people who would receive smaller benefits under this option than under current law could have more incentive to work or to delay retirement to maintain the same standard of living. In addition, those beneficiaries would probably save more while they were working to offset the reduction in Social Security benefits under this option relative to current law.

Other Considerations

For beneficiaries who claim benefits at or after their FRA, the flat benefits under this option would be greater than the federal poverty guidelines for a single-person household, thus reducing poverty for that group. Some beneficiaries who received larger benefits from Social Security could have those increases partially offset by a reduction in benefits from means-tested support pro- grams because the benefits provided by those programs generally decline as overall income increases.

Because benefits would grow with prices rather than average wages, Social Security would replace an increasingly smaller share of earnings, leading beneficiaries to rely more on other sources of retirement income to maintain their preretirement standard of living.

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Option 9:Revenues - Increase the Maximum Taxable Earnings That Are Subject to Social Security Payroll Taxes

Background

Social Security-which consists of Old-Age and Survivors Insurance and Disability Insurance-is financed primarily by payroll taxes on employers, employees, and the self-employed. Only earnings up to a maximum, which is $147,000 in calendar year 2022, are subject to the taxes, and only earnings below the maximum are used to determine benefits. The Social Security tax rate is 12.4 percent of earnings. Employees have 6.2 percent of earnings deducted from their paychecks, and the remaining 6.2 percent is paid by their employers. Self-employed individuals generally pay 12.4 percent of their net self-employment income.

In 2021, receipts from Social Security payroll taxes totaled $952 billion. Of that amount, $901 billion was from payroll taxes assessed on employers and employees, and $51 billion was from payroll taxes that self-employed individuals paid on their earnings.

When payroll taxes for Social Security were first collected in 1937, about 92 percent of earnings from jobs covered by the program were below the maximum taxable amount. During most of the program's history, the maximum was increased only periodically, so the percentage varied greatly. It fell to a low of 71 percent in 1965 and by 1977 had risen to 85 percent. Amendments to the Social Security Act in 1977 boosted the amount of covered taxable earnings, which reached 90 percent in 1983. Those amendments also specified that the taxable maximum be adjusted, or indexed, annually to match the growth in average wages. Despite those changes, the percentage of earnings that is taxable has declined in the past decade because earnings for the highest-paid workers have grown faster than average earnings. Thus, in 2020, about 83 percent of earnings from employment covered by Social Security fell below the maximum taxable amount.

Option

This option consists of two alternatives that would increase the share of earnings subject to payroll taxes.

* The first alternative would increase the taxable share of earnings from jobs covered by Social Security to 90 percent in calendar year 2023. (In later years, the maximum would grow at the same rate as average wages, as it would under current law.) Increases in the taxable maximum would increase scheduled benefits for affected workers.

* The second alternative would apply the 12.4 percent payroll tax to earnings over $250,000 in addition to earnings below the maximum taxable amount under current law. (For example, in 2023, all earnings below $160,200-the taxable maximum for that year- would be taxed, as would earnings above $250,000. Earnings between $160,200 and $250,000 would not be taxed.) The taxable maximum would continue to grow with average wages, but the $250,000 threshold would not change, so the gap between the two would shrink. The Congressional Budget Office projects that the taxable maximum would exceed $250,000 in calendar year 2036; after that, all earnings from jobs covered by Social Security would be subject to payroll taxes. The current-law taxable maximum would still be used for calculating benefits, so scheduled benefits would not change under this alternative.

Effects on the Budget

According to the staff of the Joint Committee on Taxation (JCT), implementing the first alternative would raise the maximum taxable amount to $300,000 in calendar year 2023 and increase revenues by an estimated $692 billion from 2023 through 2032. Because Social Security benefits are tied to the amount of earnings on which taxes are paid, however, some of that increase in revenues would be offset by additional benefits paid to people with earnings above the maximum taxable amount under current law. On net, this alternative would reduce federal budget deficits by an estimated $670 billion over the 10-year period. If the maximum taxable amount was adjusted by a different amount, the change in revenues would not necessarily be proportional because earnings are not evenly distributed.

Implementing the second alternative would decrease the deficit by $1.2 trillion from 2023 through 2032, according to JCT.

Although the estimates presented here reflect the assumption that total compensation would remain unchanged, they allow for behavioral responses to the higher tax. (Total compensation comprises taxable wages and benefits, nontaxable benefits, and employers' contributions to payroll taxes.) If total compensation remained unchanged, then increases in employers' contributions to payroll taxes would have to reduce other forms of compensation. The decrease in taxable wages and benefits would reduce the income base for individual income and payroll taxes, partially offsetting the increase in employers' payroll taxes. The estimates for the option reflect that income and payroll tax offset. In addition, the higher payroll taxes would create an incentive for employers and employees to seek to change the composition of compensation by shifting from taxable compensation, such as wages and salary, to forms of nontaxable compensation, such as employment-based health insurance. The estimates account for that behavioral response.

Uncertainty About the Budgetary Effects

The estimates for this option are uncertain primarily because of uncertainty surrounding CBO's underlying projections of income subject to Social Security payroll taxes. Those projections rely on CBO's projections of the economy over the next decade-particularly projections of wages, income distribution, and employment-which are inherently uncertain. However, CBO's projections of wages are typically less variable than its projections of other sources of income, such as capital gains realizations or corporate profits.

Distributional Effects

By making more earnings subject to Social Security payroll taxes, both alternatives, in a given year, would increase taxes for households with higher income. The first alternative would increase taxes for all individuals with earnings above the current-law taxable maximum, whereas the second alternative would affect only those with earnings above $250,000. (Because the $250,000 threshold would be fixed, an increasing number of people would face higher taxes over time. After 2036, when the current-law taxable maximum would exceed that threshold, it would affect those with earnings above the taxable maximum.)

The Social Security program, on net, is progressive-that is, the benefits received from the program, measured relative to taxes paid into the program over the beneficiary's lifetime, tend to be higher for lower-income households than for higher-income households. When considered in isolation, Social Security taxes are regressive-that is, people with higher earnings, in particular those with earnings above the taxable maximum, pay a smaller percentage of their total earnings in Social Security payroll taxes than those with lower earnings. The regressivity of Social Security taxes is counterbalanced by the progressivity of Social Security benefits. Specifically, people with lower earnings during their lifetime tend to receive a larger share of their earnings in benefits over their lifetime. Two factors contribute to the progressivity of benefits: First, the benefit formula replaces a larger share of earnings for people with lower lifetime earnings; and, second, people with lower lifetime earnings are more likely than average to receive disability benefits. Those factors are partially offset by the fact that people with higher lifetime earnings tend to live longer than average, which means that they collect retired-worker benefits for more years.

By making more earnings subject to Social Security payroll taxes, both of this option's alternatives would increase taxes on people with high earnings and therefore would increase the progressivity of the program overall. Even under the first alternative, which would increase benefits for affected workers, the additional benefits would be significantly smaller than the increase in taxes; thus, it would increase the progressivity of the program.

Economic Effects

In addition to having the behavioral effects reflected in conventional budget estimates, such as the ones shown above, changing the share of earnings subject to Social Security payroll taxes would also affect people's incentive to work. Those with earnings between the existing taxable limit and the higher thresholds under the first alternative, and those with earnings above the $250,000 threshold under the second alternative, would earn less after taxes for each additional hour worked. The decline in after-tax earnings would have opposing effects. On the one hand, people would tend to work fewer hours because lower earnings would make other uses of their time relatively more attractive. On the other hand, because their after-tax income would decline, they would also tend to work more hours to maintain the same standard of living. On balance, CBO estimates, the first effect would be greater than the second effect, and thus people in those earnings ranges would work less.

Under the first alternative, the incentive to work would also change for people with earnings above the new higher limit. Those people would not see any reduction in the return on their additional work because their income would exceed the taxable maximum. However, they would pay more in payroll taxes, so they would still experience a decline in their after-tax income. As a result, that group would work more.

Other Considerations

Either alternative would increase revenues for the Social Security program, which, according to CBO's projections, will not have sufficient income to finance the benefits that are due to beneficiaries under current law. If current law remained in place, Social Security tax revenues, which already are less than spending for the program, would grow more slowly than spending for Social Security benefits. In CBO's long-term projections of the economy and budget under current law, the combined Old-Age and Survivors Insurance and Disability Insurance trust funds are projected to be exhausted in calendar year 2033. If the trust funds were exhausted, then the Social Security Administration would still be able to pay some benefits, but it would not have the authority to make payments in excess of the payroll taxes received each year. The first alternative, which would increase the taxable share of earnings from jobs covered by Social Security to 90 percent, would delay the exhaustion of the combined trust funds by 4 years, until calendar year 2037. The second alternative, which would apply the 12.4 percent payroll tax to earnings over $250,000, would delay the exhaustion of the combined trust funds by 13 years, until calendar year 2046.

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(Continues with Part 7 of 10)

The report is posted at: https://www.cbo.gov/system/files/2022-12/58164-budget-options-large-effects.pdf