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Key Findings Details

The Growth in Social Security Benefits Among the Retirement Age Population from Increases in the Cap on Covered Earnings
by Alan L. Gustman, Thomas L. Steinmeier and Nahid Tabatabai
WP 2010-227
  • Using data from the Health and Retirement Study, we find for the cohort born from 1948 to 1953 that, compared to cohorts 12 and 24 years older respectively, benefits were increased by 1.5 percent and 3.7 percent due to real increases over time in the maximum level of covered earnings subject to the payroll tax.
  • Tax receipts were increased by 5.3 and 10.6 percent over tax receipts that would have been collected under the payroll tax ceilings that applied to the cohorts 12 and 24 years older respectively.
  • Comparing the changes in benefits and taxes, about 22 percent of the additional tax revenues created by the increase in the payroll tax cap between the Early Boomer cohort and those 12 years older is used to increase benefits.
  • Similarly, about 27 percent of the additional tax revenues created by the increase in the payroll tax cap between the Early Boomer cohort and those 24 years older is used to increase benefits.