Social Security is financed through a dedicated payroll tax. Employers and employees each pay 6.2 percent of wages up to the taxable maximum of $137,700 (in 2020), while the self-employed pay 12.4 percent.
In 2019, $945 billion (89 percent) of total income for the Old-Age, Survivors and Disability Insurance (OASDI) program came from payroll taxes. The remainder was provided by interest earnings ($81 billion or 8 percent) and revenue from taxation of OASDI benefits ($37 billion or 3 percent).
The payroll tax rates are set by law and apply to earnings up to the taxable maximum. This amount, called the earnings base, rises as average wages increase. The following table reflects the portion of the tax rate that is dedicated to the OASI and the DI Trust Funds.
|Share of the Tax Rate for Each Trust Fund|
|2016 through 2018
2019 and later
|SOURCE: The Bipartisan Budget Act of 2015 and the 2019 OASDI Trustees Report.|