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CRR Studies Expanding Social Security’s Payroll Tax Base to Increase Revenue
On September 2, 2025, the Center for Retirement Research (CRR) at Boston College published its issue brief, How Much Could Taxing Health Benefits Help Social Security? Recently, CRR has been studying options to help improve Social Security’s financial condition. This issue brief is based on a recent study that focused on broadening the payroll tax base by including the value of employer-sponsored health insurance (ESI). According to CRR, the additional revenue generated from expanding the payroll tax base would markedly improve Social Security’s finances.
The study results indicated that this approach may be considered as a portion of a larger reform package since it would be rather regressive by raising the tax for some low-wage workers while collecting no additional revenue from those workers with an earnings cap.
Some of the other key findings include:
- Adding ESI benefits to the Social Security taxable wage base would have increased payroll taxes by about $420 per year on average, increasing about 7%.
- Of those workers receiving ESI benefits, the average annual contributions would have increased by $1,070, or about 12%.
- The inclusion of ESI benefits would have provided an additional $70 billion to Social Security and decreased Social Security’s 75-year shortfall by about 25%.
The brief concludes, “Adding ESI benefits to the payroll tax base would generate slightly less revenue than either increasing the annual taxable maximum by about $100,000 or levying the payroll tax on earnings above $400,000. Clearly these policy options would affect lower earners and higher earners very differently. Raising the taxable maximum would require highly paid earners to pay slightly higher taxes. Adding ESI benefits to the payroll tax base would require lower-paid earners to contribute more while collecting no additional revenue from the highest earners. These distributional consequences could be helpful to consider as the debate over Social Security’s solvency intensifies and policymakers select various options to include in a package of reforms.”
The brief is available here.