US payroll tax for wealthy to jump at highest rate for 34 years


The Social Security Administration predicts the government will make about $11.6 billion in new tax revenues from its adjustment.

US payroll taxes for the wealthy will increase at the highest level for 34 years in 2017 due to an automatic adjustment affecting millions of workers.

Although over the last two years, only the first $118,500 of earnings were subject to the Social Security “taxable minimum” of 6.2%, this year the taxable minimum has jumped 7.3% to $127,200. The adjustment takes place annually based on the US wage index, which rose by 3.6%, rather than consumer prices, which increased by 1.7% in the 12 months that ended in November.

But the charge appears particularly steep this year because the government is packing in two years of wage gains into one adjustment. While the wage index also rose by 3.6% in 2014, the Social Security Administration was unable to raise the taxable minimum last year as an increase is prohibited in a year in which Social Security recipients fail to receive a cost-of-living increase.

The change is estimated to hit 12 million workers out of a total of 173 million who pay into the Social Security fund and it is expected to cost each one about $539. Employers, which also pay a similar 6.2% payroll tax, will likewise see costs rise.

The Social Security Administration predicts the government will make about $11.6 billion in new tax revenues from the move.