Summary
This paper measures the prevalence, worth, and distribution of sure fringe advantages which might be at the moment excluded from Social Safety’s Outdated Age, Survivors, and Incapacity Insurance coverage (OASDI) contribution base, together with employer-sponsored medical insurance (ESI) and employer contributions to well being financial savings accounts, medical financial savings accounts, and dependent care advantages. We then simulate the potential affect of broadening the contribution base to incorporate the worth of these advantages, exhibiting the results on program income and the scale and distribution of OASDI contributions. Our knowledge come from federal earnings tax information from the Inside Income Service, which hyperlinks particular person tax returns, enterprise returns, and data returns, together with Type W-2s.
The paper discovered that:
In 2021, 40 p.c of wage and wage staff acquired ESI advantages, with a mean annual worth of $10,710, equal to 12 p.c of annual money wages. The prevalence and worth of ESI advantages elevated with earnings, however ESI advantages equaled a bigger share of money wages for low-wage earners than for higher-wage earners.
Broadening the OASDI contribution base to incorporate ESI advantages for wage and wage staff would have raised common annual 2021 OASDI contributions by $420, a 7 p.c enhance. Amongst wage and wage staff with ESI, common annual 2021 contributions would have elevated 12 p.c total and 22 p.c for these with annual earnings between $25,000 and $49,999.
Including employer contributions to well being financial savings accounts, medical financial savings accounts, and dependent care advantages to the contribution base would have negligible results as a result of comparatively few staff obtain these advantages.
The coverage implications of the discovering are:
Broadening the OASDI contribution base to incorporate the worth of ESI advantages may enhance program funds by producing extra income.
Nonetheless, including ESI advantages to the contribution base would elevate payroll tax burdens for a lot of low-wage staff, whereas amassing no extra income from staff with earnings above this system’s taxable most.
