Changing the taxable maximum: effect on social security taxes by industry and firm size.

During debate on the 1977 Social Security Amendments, it was suggested that the impact on firms of a change in the mamximum taxable amount under the social security program would in part depend on the size of the firm. This study analyzes the relationship between increases in employer payroll-tax liability and both firm size and industry group. The authors conclude that there are substantial firm-size and industry effects on the increases in employer payroll-tax liability resulting from the 1977 amendments, with the largest firms experiencing, on the average, increases about three percentage points higher than those for the smaller firms. If the taxable maximum were changed (either doubled or removed) from the base established by the 1977 amendments, the industry effect would again be substantial, although there would be little or no firm-size effect.