How Might Workers Respond If Social Security’s Revenue Base Were Broadened?

Karen Smith and Richard Johnson, Urban Institute

This project will use restricted IRS Statistics of Income data to analyze the amount and distribution of workers’ compensation that is excluded from the Social Security contribution base. It will describe the characteristics of workers with excluded compensation and estimate how much additional Social Security tax revenue could be collected under alternate treatment of excluded income. The longitudinal feature of the data will enable us to estimate potential behavioral responses to any changes in the Social Security wage cap, payroll tax rate, or taxability of excluded compensation.