Neurons in the lateral superior olive (LSO) are believed to be involved in processing of interaural level difference (ILD) cues for sound localization. However, the ILD-tuning of LSO neurons varies with the absolute sound pressure levels (SPLs) at the two ears, in contrast to the relatively robust perceptual processing of ILD cues at different absolute SPLs. Tsai et al. (J. Neurophysiol. 2010) proposed that if some inferior colliculus (IC) neurons compute the difference between the contralateral and ipsilateral LSO outputs, the dependencies on absolute SPLs could be canceled out. However, they only considered pure-tone stimulation of single neurons at their characteristic frequencies and at relatively low SPLs. In this study, we evaluated the hypothesis of Tsai and colleagues using computational models of populations of auditory nerve, LSO and IC neurons consistent with Tsai and colleagues’ proposal. Predictions from two different neural decoder algorithms applied to LSO and IC model outputs indicate that discharge-rate saturation and spread of excitation in the auditory nerve lead to even greater SPL-dependence of ILD coding across a population of LSO neurons than is apparent in single neurons, and the IC differencing operation proposed by Tsai and colleagues does relatively little to ameliorate this problem.