Do Income Taxes Affect the Progressivity of Social Security?

The brief’s key findings are:

• Low earners receive much more in Social Security benefits than they pay in Social Security taxes, reflecting the program’s progressive design.

• The interaction between Social Security provisions and income taxes has little net effect on the program’s progressivity:
  • the exemption of employers’ Social Security contributions from workers’ income taxes makes the system less progressive, but

• the income taxation of retirees’ Social Security benefits makes the system more progressive.
• Over time, the income tax effects will add to progressivity because an increasing percentage of retirees will pay taxes on their benefits.