Workers will pay more in payroll taxes next year to support Social Security, while retirees and other program beneficiaries will see a modest increase in their monthly benefits. Based on low inflation over the past two years, benefits will see a 0.3 % COL increase.
The Social Security Agency also said the maximum amount of earnings subject to the Social Security tax would climb 7.3% to $127,200 in 2017 from $118,500 in 2015 and 2016, affecting an estimated 12 million workers. The worker’s share of Social Security payroll tax is 6.2% of eligible wages; someone making at least $127,200 in 2017 would pay an additional $539 over the course of next year.
Employers also pay a 6.2% tax on eligible wages and would pay more, too, though economists generally believe those costs are borne by workers in the form of lower wages. Self-employed people pay the employer’s and employee’s share of the tax.
The cost-of-living figure also plays a major part in determining premiums for Medicare Part B, which covers doctor visits and other types of outpatient care for elderly and disabled Americans.
The 0.3% bump is likely to result in higher premiums for some 30% of Medicare beneficiaries. They include those who already pay higher premiums because of their higher incomes, those who receive Medicare but have deferred or aren’t eligible for Social Security benefits and those who are new to Medicare in 2017.