SOCIAL SECURITY ADMINISTRATION BALTIMORE, MD 21235-0001

SOCIAL SECURITY

Office of the Chief Actuary

June 1, 2017

The Honorable Tom Cotton

United States Senate

Washington, D.C. 20510

Dear Senator Cotton:

Thank you for your letter of April 12 regarding the implications for Social Security of reducing 

the employee portion of the payroll tax. The proposal would cut the payroll tax rate by 2 

percentage points on Social Security-covered earnings up to: 

 $28,258 for workers filing an individual income tax return,

 $56,512 for a married couple filing a joint return, and

 $28,258 for a married worker filing a separate return.

The proposal would reduce the employee portion of the payroll tax rate from 6.2 to 4.2 percent 

on annual earnings below the applicable threshold; the employer portion would remain at 6.2 

percent. The tax rate for self-employed workers would be reduced from 12.4 to 10.4 percent on 

annual earnings below the applicable threshold. The dollar levels indicated above would apply 

for tax year 2018, with the thresholds increased by price inflation after 2018; that is, by the 

annual COLA increase percentage determined for December of the prior calendar year. 

As we have discussed with your staff, this tax rate reduction would be implemented by way of a 

credit associated with the workers’ income tax filings. The reductions could not be efficiently 

applied in payroll withholding for at least two reasons. First, the employer would not know for 

certain the tax filing status the worker will use for the year. Second, for individual workers or 

married couples with more than one job during the year, it would not be clear to which job’s 

earnings the reduced payroll tax rate should be applied. As a result, the reduction in payroll tax 

would be received in the form of a credit included in workers’ federal income tax returns for the 

year.

The estimates provided in this letter reflect the baseline intermediate assumptions of the 2016 

Trustees Report. We estimate that enactment of this proposal would increase the long-range 

OASDI actuarial deficit by about 0.77 percent of taxable payroll, from 2.66 percent of payroll 

under current law to 3.43 percent of payroll under the proposal. Please see the attached Table 1 

that shows estimated annual effects of implementing this change over the next 75 years. In the 

near term, over the period 2019 through 2027, the reduction in OASDI payroll tax income would 
Page 2 – The Honorable Tom Cotton

average slightly above 1.0 percent of payroll, for a net reduction in payroll tax revenue of 

roughly $900 billion. 

For the purpose of developing these estimates, our modeling incorporates a behavioral response 

by workers and employers to a change in tax rates that would offset, to a small degree, the 

reduction in payroll tax revenue from this proposal. 

We have enjoyed working with Alex Hanson and Matt Shannon of your staff in developing the 

requested estimates. Development of these estimates reflects the efforts of many in our office, 

but particularly Karen Glenn, Chris Chaplain, and Daniel Nickerson. Please let me know if we 

may be of any further assistance on this or any other matter related to Social Security.

Sincerely,

 

Stephen C. Goss, ASA, MAAA

Chief Actuary

Enclosures
Year Cost Rate

Income

Rate

Annual

Balance Cost Rate

Income

Rate

Annual

Balance

2016 14.05 12.94 -1.10 303 0.00 0.00 0.00

2017 13.72 12.92 -0.80 293 0.00 0.00 0.00

2018 13.86 12.96 -0.90 277 0.00 0.00 0.00

2019 13.99 11.88 -2.10 262 0.00 -1.08 -1.08

2020 14.14 11.91 -2.22 239 0.00 -1.07 -1.07

2021 14.27 11.95 -2.33 217 0.00 -1.06 -1.06

2022 14.49 11.99 -2.51 195 0.00 -1.05 -1.05

2023 14.76 12.02 -2.74 172 0.00 -1.04 -1.04

2024 15.03 12.06 -2.96 149 0.00 -1.03 -1.03

2025 15.29 12.09 -3.19 126 0.00 -1.02 -1.02

2026 15.47 12.12 -3.35 104 0.00 -1.01 -1.01

2027 15.65 12.14 -3.51 81 0.00 -1.00 -1.00

2028 15.82 12.17 -3.65 58 0.00 -0.99 -0.99

2029 15.97 12.19 -3.78 36 0.00 -0.98 -0.98

2030 16.10 12.21 -3.90 13 0.00 -0.97 -0.97

2031 16.22 12.23 -4.00 ---- 0.00 -0.96 -0.96

2032 16.33 12.25 -4.08 ---- 0.00 -0.95 -0.96

2033 16.41 12.26 -4.15 ---- 0.00 -0.94 -0.95

2034 16.47 12.28 -4.19 ---- 0.00 -0.93 -0.94

2035 16.50 12.29 -4.21 ---- 0.00 -0.93 -0.93

2036 16.56 12.31 -4.25 ---- 0.00 -0.92 -0.92

2037 16.60 12.32 -4.28 ---- 0.00 -0.91 -0.91

2038 16.61 12.33 -4.28 ---- 0.00 -0.90 -0.90

2039 16.61 12.34 -4.27 ---- 0.00 -0.89 -0.89

2040 16.59 12.35 -4.24 ---- 0.00 -0.88 -0.88

2041 16.56 12.36 -4.20 ---- 0.00 -0.87 -0.87

2042 16.53 12.37 -4.17 ---- 0.00 -0.86 -0.86

2043 16.50 12.38 -4.12 ---- 0.00 -0.85 -0.86

2044 16.47 12.39 -4.08 ---- 0.00 -0.85 -0.85

2045 16.45 12.39 -4.06 ---- 0.00 -0.84 -0.84

2046 16.43 12.40 -4.02 ---- 0.00 -0.83 -0.83

2047 16.40 12.41 -3.99 ---- 0.00 -0.82 -0.82

2048 16.39 12.42 -3.97 ---- 0.00 -0.81 -0.81

2049 16.37 12.43 -3.94 ---- 0.00 -0.80 -0.81

2050 16.36 12.44 -3.92 ---- 0.00 -0.80 -0.80

2051 16.36 12.45 -3.91 ---- 0.00 -0.79 -0.79

2052 16.37 12.45 -3.92 ---- 0.00 -0.78 -0.78

2053 16.39 12.46 -3.93 ---- 0.00 -0.77 -0.77

2054 16.43 12.48 -3.95 ---- 0.00 -0.76 -0.77

2055 16.46 12.49 -3.98 ---- 0.00 -0.76 -0.76

2056 16.51 12.50 -4.01 ---- 0.00 -0.75 -0.75

2057 16.56 12.51 -4.05 ---- 0.00 -0.74 -0.74

2058 16.61 12.52 -4.09 ---- 0.00 -0.73 -0.73

2059 16.66 12.53 -4.13 ---- 0.00 -0.73 -0.73

2060 16.71 12.54 -4.16 ---- 0.00 -0.72 -0.72

2061 16.76 12.55 -4.20 ---- 0.00 -0.71 -0.71

2062 16.81 12.57 -4.24 ---- 0.00 -0.70 -0.70

2063 16.86 12.58 -4.28 ---- 0.00 -0.70 -0.70

2064 16.91 12.59 -4.32 ---- 0.00 -0.69 -0.69

2065 16.96 12.60 -4.36 ---- 0.00 -0.68 -0.68

2066 17.01 12.61 -4.40 ---- 0.00 -0.67 -0.68

2067 17.06 12.62 -4.44 ---- 0.00 -0.67 -0.67

2068 17.11 12.63 -4.48 ---- 0.00 -0.66 -0.66

2069 17.17 12.64 -4.53 ---- 0.00 -0.65 -0.65

2070 17.22 12.65 -4.57 ---- 0.00 -0.65 -0.65

2071 17.27 12.66 -4.60 ---- 0.00 -0.64 -0.64

2072 17.31 12.67 -4.63 ---- 0.00 -0.63 -0.63

2073 17.34 12.68 -4.66 ---- 0.00 -0.63 -0.63

2074 17.37 12.69 -4.68 ---- 0.00 -0.62 -0.62

2075 17.39 12.70 -4.70 ---- 0.00 -0.61 -0.61

2076 17.41 12.70 -4.70 ---- 0.00 -0.61 -0.61

2077 17.41 12.71 -4.70 ---- 0.00 -0.60 -0.60

2078 17.41 12.72 -4.69 ---- 0.00 -0.59 -0.59

2079 17.41 12.72 -4.68 ---- 0.00 -0.59 -0.59

2080 17.40 12.73 -4.67 ---- 0.00 -0.58 -0.58

2081 17.40 12.74 -4.66 ---- 0.00 -0.57 -0.58

2082 17.41 12.74 -4.66 ---- 0.00 -0.57 -0.57

2083 17.42 12.75 -4.67 ---- 0.00 -0.56 -0.56

2084 17.44 12.76 -4.68 ---- 0.00 -0.56 -0.56

2085 17.47 12.77 -4.70 ---- 0.00 -0.55 -0.55

2086 17.50 12.77 -4.73 ---- 0.00 -0.54 -0.54

2087 17.54 12.78 -4.76 ---- 0.00 -0.54 -0.54

2088 17.59 12.79 -4.80 ---- 0.00 -0.53 -0.53

2089 17.63 12.80 -4.83 ---- 0.00 -0.53 -0.53

2090 17.68 12.81 -4.87 ---- 0.00 -0.52 -0.52

2091 17.72 12.82 -4.91 ---- 0.00 -0.52 -0.52

Cost Rate Income Rate

Actuarial 

Balance

Change in 

Cost rate

Change in 

Income Rate

Change in 

Actuarial

Balance

16.50% 13.08% -3.43% 2030 0.00% -0.77% -0.77%

Office of the Chief Actuary

Based on Intermediate Assumptions of the 2016 Trustees Report. Social Security Administration

1 Under present law the year of combined Trust Fund reserve depletion is 2034.

Summarized Rates: OASDI

Year of reserve 

depletion1

Summarized Rates: OASDI

2016 - 2090

June 1, 2017

Expressed as a percentage of present-law

taxable payroll Trust Fund

Ratio

1-1-year

Expressed as a percentage of present-law

taxable payroll

Table 1 - OASDI Cost Rate, Income Rate, Annual Balance, and Trust Fund Ratio

Reduce by 2 percentage points the OASDI employee payroll tax starting in 2018 for the first $28,258 of taxable earnings for single filers 

and married individuals filing separate, and the first $56,512 for married couples filing joint. Thresholds increase by price inflation after 

2018. Payroll tax reductions provided as a credit in income tax return for the tax year.

Proposal Change from Present Law