Social Security Rules and Marginal Tax Rates

61 Pages Posted: 2 May 2011

See all articles by Martin S. Feldstein

Martin S. Feldstein

National Bureau of Economic Research (NBER) (deceased); Harvard University (deceased)

Andrew A. Samwick

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 1992

Abstract

The social security payroll tax has become the largest tax paid by the majority of American households. Although, the statutory marginal social security tax rate is the same for all those with wage and salary income up to the maximum level, the complex rules linking social security taxes and subsequent benefits imply that the net marginal social security tax on individual earnings varies substantially among individuals. For some taxpayers, the net marginal social security tax is equal to the statutory rate, while for other taxpayers the combined effect of the tax and the resulting benefits implies a very much lower net marginal tax rate or even a negative marginal tax rate when the incremental benefits exceed the additional taxes.

Suggested Citation

Feldstein, Martin S. and Samwick, Andrew A., Social Security Rules and Marginal Tax Rates (January 1992). NBER Working Paper No. w3962. Available at SSRN: https://ssrn.com/abstract=1827433

Martin S. Feldstein (Contact Author)

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Harvard University (deceased)

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Andrew A. Samwick

Dartmouth College - Department of Economics ( email )

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HOME PAGE: http://www.dartmouth.edu/~samwick

National Bureau of Economic Research (NBER)

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