Additionally, we assume postretirement surviving spouse benefits are collected up to the normal life expectancy of women in the same birth year conditional on reaching age 25. A couple in which both spouses work would have a net present value that falls between the result for the singles and the married men as defined here. The decline is the result of increasing earnings within each education classification. Once the benefit formula is applied to the increased earnings, the replacement rate and the rate of return fall. The benefits in the table are those that accrue to a family with two children, born when the worker is age 25, with each child and the surviving spouse collecting benefits.
Several factors explain the widening lifetime tax payments.
One factor is the taxable maximum. The taxable maximums in force between 1953 and 2000, the years those born in 1935 are in the labor force, increased so as to capture an increasing share of the wage distribution. Thus a smaller share of the more highly educated workers' earnings was taxed in past years. Also as noted earlier, the earnings of more highly educated workers have grown relative to those with lesser educations. This more rapid growth is assumed to persist in our projections, and combined with a taxable maximum that keeps pace with earnings growth, the distribution in lifetime tax payments widens.