	Introduction

Since the beginning of the program, Social Security taxes have been levied on covered earnings up to a maximum level set each year, referred to as the taxable earnings base . The taxable earnings base also limits the annual amount of earnings that are used in benefit calculations and thus sets a ceiling on the amount Social Security pays in benefits. However, its base continued to be the same as Social Security's through 1990. Between 1972 and 1977, and since 1982, the base has been indexed to the increase in wages in the economy, which has reduced the volatility somewhat. However, the share of covered earnings that is taxed has fallen from 90% of all earnings in 1982 to 83% in 2016. The Future of the Taxable Earnings Base

The taxable earnings base is increased annually by the average growth in wages, so the share of the population below the cap is expected to remain relatively stable over time. Although the solvency impact would be improved to a greater degree if the cap on taxes were eliminated and the cap on benefits were retained, the traditional link between contributions and benefits would be broken. As described previously, the portion of Social Security covered earnings subject to the payroll tax has fluctuated since its inception. Contributions can be increased by (1) eliminating the taxable earnings base immediately or in a future year, (2) raising the taxable earnings base such that, for example, 90% of earnings are subject to the payroll tax, (3) taxing earnings above the current taxable earnings base at a lower payroll tax rate, or (4) taxing earnings above a certain threshold that is greater than the current-law taxable maximum at the current payroll tax rate. If all wages counted toward benefits as they are now, the trust fund would be depleted in 2067; 68% of the projected financial shortfall in the Social Security program would be eliminated.
Social Security taxes are levied on covered earnings up to a maximum level set each year. In 2018, this maximum—formally called the contribution and benefit base, and commonly referred to as the taxable earnings base or the taxable maximum—is $128,400. The taxable earnings base serves as both a cap on contributions and on benefits. As a contribution base, it establishes the maximum amount of a worker's earnings that is subject to the payroll tax. As a benefit base, it establishes the maximum amount of earnings used to calculate benefits.
Since 1982, the Social Security taxable earnings base has risen at the same rate as average wages in the economy. Because the cap is indexed to the average growth in wages, the share of the population below the cap has remained relatively stable at roughly 94%. However, due to increasing earnings inequality, the percentage of aggregate covered earnings that is taxable has decreased from 90% in 1982 to 83% in 2016.
Raising or eliminating the cap on wages that are subject to taxes could reduce the long-range deficit in the Social Security trust funds. For example, phasing in an increase in the maximum taxable earnings to cover 90% of earnings over the next decade would eliminate roughly 30% of the long-range shortfall in Social Security. If all earnings were subject to the payroll tax, but the current-law base was retained for benefit calculations, the Social Security trust funds would remain solvent for over 60 years. However, having different bases for contributions and benefits would weaken the traditional link between the taxes workers pay into the system and the benefits they receive.