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Adding employer contributions to health insurance to Social Security's earnings and tax base

Series Title(s):
Center for Retirement Research working paper
Author(s):
Smith, Karen E., author
Toder, Eric, author
Center for Retirement Research at Boston College, author.
Publication:
Chestnut Hill, MA : Center for Retirement Research at Boston College, April 2014
Language(s):
English
Format:
Text
Subject(s):
Health Benefit Plans, Employee -- economics
Income
Income Tax -- economics
Insurance Benefits -- economics
Retirement -- economics
Social Security -- economics
Taxes -- economics
Forecasting
Health Benefit Plans, Employee -- trends
Income Tax -- trends
Insurance Benefits -- trends
Models, Theoretical
Social Security -- trends
Taxes -- trends
Humans
United States
Genre(s):
Technical Report
Abstract:
The inclusion of employer-sponsored health insurance (ESI) in taxable income would increase income and payroll tax receipts, but would also increase Old Age, Survivors, and Disability Insurance (OASDI) benefits by adding ESI to the OASDI earnings base. This study uses the Urban Institute's DYNASIM model to estimate the effects of including ESI premiums in taxable earnings on the level and distribution by age and income groups of income tax burdens, payroll tax burdens, and OASDI benefits. We find that the increased present value of OASDI benefits from including ESI in the wage base in 2014 offsets about 22 percent of increased income and payroll taxes, 57 percent of increased payroll taxes, and 72 percent of increased OASDI taxes. The overall distributions of taxes and benefits by income group follow the same pattern, with both taxes and benefits increasing as a share of income between the bottom and middle quintiles and then declining as a share of income for higher income taxpayers. But households in the bottom income quintiles receive a net benefit from including ESI in the tax base because their increase in OASDI benefits exceeds their increase in income and payroll taxes. Over a lifetime perspective, all earnings groups experience net tax increases, but workers in the middle of the earnings distribution experience the largest net tax increases as a share of lifetime earnings. Higher benefits offset a larger share of tax increases for lower than for higher income groups.
Copyright:
Reproduced with permission of the copyright holder. Further use of the material is subject to CC BY license. (More information)
Extent:
1 online resource (1 PDF file (41 pages))
Illustrations:
Illustrations
NLM Unique ID:
101646652 (See catalog record)
Series Title(s):
Center for Retirement Research working paper
Author(s):
Smith, Karen E., author
Toder, Eric, author
Center for Retirement Research at Boston College, author.
Publication:
Chestnut Hill, MA : Center for Retirement Research at Boston College, April 2014
Language(s):
English
Format:
Text
Subject(s):
Health Benefit Plans, Employee -- economics
Income
Income Tax -- economics
Insurance Benefits -- economics
Retirement -- economics
Social Security -- economics
Taxes -- economics
Forecasting
Health Benefit Plans, Employee -- trends
Income Tax -- trends
Insurance Benefits -- trends
Models, Theoretical
Social Security -- trends
Taxes -- trends
Humans
United States
Genre(s):
Technical Report
Abstract:
The inclusion of employer-sponsored health insurance (ESI) in taxable income would increase income and payroll tax receipts, but would also increase Old Age, Survivors, and Disability Insurance (OASDI) benefits by adding ESI to the OASDI earnings base. This study uses the Urban Institute's DYNASIM model to estimate the effects of including ESI premiums in taxable earnings on the level and distribution by age and income groups of income tax burdens, payroll tax burdens, and OASDI benefits. We find that the increased present value of OASDI benefits from including ESI in the wage base in 2014 offsets about 22 percent of increased income and payroll taxes, 57 percent of increased payroll taxes, and 72 percent of increased OASDI taxes. The overall distributions of taxes and benefits by income group follow the same pattern, with both taxes and benefits increasing as a share of income between the bottom and middle quintiles and then declining as a share of income for higher income taxpayers. But households in the bottom income quintiles receive a net benefit from including ESI in the tax base because their increase in OASDI benefits exceeds their increase in income and payroll taxes. Over a lifetime perspective, all earnings groups experience net tax increases, but workers in the middle of the earnings distribution experience the largest net tax increases as a share of lifetime earnings. Higher benefits offset a larger share of tax increases for lower than for higher income groups.
Copyright:
Reproduced with permission of the copyright holder. Further use of the material is subject to CC BY license. (More information)
Extent:
1 online resource (1 PDF file (41 pages))
Illustrations:
Illustrations
NLM Unique ID:
101646652 (See catalog record)