Should Social Security Rely Solely on the Payroll Tax?
The brief’s key findings are:
- The Social Security payroll tax supports: 1) the cost of current benefits; and 2) the “legacy cost” of paying benefits in excess of contributions to early generations.
- Covering current costs through the payroll tax gives workers’ a sense that they have earned their benefits and provides a stable revenue source.
- Covering legacy costs, however, means that low- and middle-income workers are paying disproportionately for the benefits of past generations.
- Shifting legacy costs to the income tax would spread the burden more broadly.