This section describes our approach for calculating marginal tax rates for families. We
focus on tax units headed by someone between ages 25 and 50. The model we employ
does not adjust the tax rates for the extent to which they add to Social Security benefits
–– a key part of the safety net for older Americans, but not as important for most of our
population. In any case, most workers get very little additional benefit for their additional
Social Security taxes. Social Security only counts 35 years of work, so any single year
of work often at best only replaces that of another year in determining whether any net
additional benefits will be paid. In addition, many spouses get little or nothing for their
additional work, while the progressive Social Security benefit schedule insures that the
marginal dollar paid in tax yields a much lower return, if any at all, relative to the first
dollars contributed. Even when some earnings additions do increase the value of future
Social Security benefits, those future benefits generally don’t affect current take-home
pay. The bottom line is that Social Security marginal tax rates are very close for most
people to their net marginal rate even after accounting for marginal benefits. Still, for this analysis, we exclude those most affected by Social Security by excluding many
people who are likely to be retired, and unlikely to return to work.