Here’s who could pay higher Social Security taxes under proposals to shore up the program
John Driscoll knows it’s going to take a major overhaul to fix Social Security — and he’s willing to pay up.
Driscoll, the chair of international staffing firm Magnit Global, supports a proposal that would require high earners to pay more into the system. That includes him.
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Eliminating the cap on how much people pay into the program is a suggestion that has been floating around for years. And while it’s still far from becoming a reality, lawmakers may be forced to turn to this fix and others as Social Security gets closer to insolvency.
“I don’t think we can sustain the American dream, let alone the American balance sheet, unless those of us — the wealthiest — bear their fair share of the burden,” Driscoll said.
Driscoll, who is also a member of Patriotic Millionaires, an advocacy group of high-net-worth individuals focused on the country’s economy, said fixing Social Security is an obligation.
“It doesn’t make any sense to me that people who gained the most wouldn’t be willing to contribute more,” he said. “Some of America’s best moments have been those of shared sacrifice, and the only way America wins is if we all share in the solution, with the wealthiest people sharing more of the cost.”
Social Security is facing a financial shortfall. The program’s trust fund is currently on track to run out of money in 2032, at which point recipients would receive about 78% of the benefits they’re owed, according to the latest trustees report. Congress has never let Social Security fail — although it did come very close in the 1980s — but lawmakers haven’t yet taken serious measures to alter the program’s current trajectory.
Right now, there’s little appetite for many of the plans that policymakers and others have proposed to fix the shortfall. But as the deadline looms to prevent insolvency, it’s possible these proposals could become more attractive — or simply more necessary. One that has received support from both sides of the aisle, and was spoken about by President Joe Biden during his 2024 campaign, is asking the wealthy to pay a larger share of their income into the Social Security system.
Currently, workers don’t pay Social Security taxes on any income they earn above $184,500. About 6% of covered workers every year have earnings above the limit, known as the taxable maximum, according to the Social Security Administration.
One frequent suggestion to bolster the trust fund is to eliminate that cap on taxed income, which would mean all workers would contribute 6.2% (or 12.4% if they’re self-employed) of their entire income into the program, regardless of how much they earn.
During a recent Senate Finance Committee hearing, Sen. Elizabeth Warren, a Massachusetts Democrat, said she and Sen. Bernie Moreno, an Ohio Republican, were calling on Congress to “scrap the cap” on payroll taxes.
“If you’re a nurse or you’re a construction worker, you’re paying Social Security on 100% of your income. But if you’re a corporate lawyer raking in millions, you’re only paying Social Security on a tiny little fraction of your income,” Warren said during the hearing.
Policymakers have put forward different versions of the proposal over the years. The Biden administration pitched a phased-in approach to lifting the cap. Under that proposal — similar to one included in the proposed Social Security 2100 Act — the tax would apply to earnings above $400,000, and annual income-tax caps would rise with inflation each year until workers of all income levels would be paying into the program.
Lawmakers created the wage-base limit, as the cap is known, when they passed the original Social Security Act in 1935. When the program began collecting contributions in 1937, the cap was set at $3,000 and covered a majority of wages in the economy, said Kathleen Romig, a senior fellow at the Center on Budget and Policy Priorities.
The cap was increased a number of times over the decades, and in the 1970s, legislators tied it to the average wage index. But as inequality has supercharged the gap between workers with the highest and lowest incomes, wages above the cap have grown much faster than those under the cap, Romig noted.
The two paths — and the potential obstacles
If lawmakers were to eliminate the cap, they’d have to decide how to treat Social Security benefits. Either benefits could rise in line with what a person contributes with no limit, or the government could cap benefits even while increasing payroll taxes. Social Security’s benefit formula is complex: Individuals’ earnings are broken up by thresholds, known as bend points, so that the program remains progressive and lower-income workers receive benefits at a rate that’s high enough to help sustain them in their retirement.
The first option would simply extend both contributions and benefits to infinity, which could mean people with high incomes could end up receiving a lot of money in retirement benefits. In 2026, the maximum benefit is $5,181 per month, or $62,172 for the year, for someone who paid in the maximum amount under the earnings cap for at least 35 years and delayed claiming benefits until age 70, according to AARP.
The second option, with benefits being capped, would bring in much more revenue but would dramatically alter one of the tenets of the program: that everyone who contributes gets an amount that feels fair based on what they’ve put into the system. “It would break the link between contributions and benefits,” Romig said.
Breaking that link would “fundamentally change the nature of the program,” said Romina Boccia, director of budget and entitlement policy at the Cato Institute, a libertarian think tank. “You undermine the earned benefit. The cap exists because it is an earnings-related program where you get credits.”
The proposal could do more harm than good, Boccia added. For example, eliminating the tax cap could increase marginal tax rates on labor income in high-tax states, including New York, California and Oregon, which could discourage workers from earning more. “If you look at who would be affected, it is highly productive professionals,” she said.
The effect on high earners in those states specifically, where many legislators are Democrats, makes this a hard proposal to pass at face value, said Jessica Riedl, a budget and tax fellow at the Brookings Institution. “That’s going to hit a lot of their workers,” Riedl said.
Although the idea has been a “perennial proposal,” as Riedl put it, Congress likely won’t bring it to a vote “anytime soon” given how negatively it could impact Democrats’ high-earning constituents.
“I would say lifting the cap is more of a talking point than a proposal Democrats would bring to a vote,” she said.
It would be a start
There are many factors that go into determining how much of an impact eliminating the tax cap would have on the Social Security’s bottom line. However, most economists say it wouldn’t fix everything.
“There is a very common misperception that eliminating the tax cap would make Social Security solvent forever,” Riedl said. “In reality, it would only keep it out of deficit for four years,” she noted — referring to a dynamic where the program pays out more than it receives — “and only cut half of the shortfall, so Congress would still have to find other savings.” This is assuming benefits are not linked to contributions.
The program can still pay out benefits with a deficit, just as it’s doing right now. But getting rid of the tax cap without tying it to a change in benefits would help the program extend the amount of time it can rely on its reserves. Eliminating the cap without providing a benefit credit would mean the program has asset reserves until 2067, according to a 2025 analysis from the nonprofit fiscal group Peter G. Peterson Foundation. Eliminating the cap while also providing a benefit credit would keep the program solvent until 2059.
There also are measures related to getting rid of the income cap that could help get the program closer to solvency.
The burden of eliminating the tax cap would lie entirely with current workers and would not affect current beneficiaries, said Karen Smith, a senior fellow in the tax and income supports division at the Urban Institute, a nonpartisan policy group. Adding a provision, like one suggested by Warren, to apply a tax to net investment income for the highest-income families would target current beneficiaries as well, many of whom are living off their investments in addition to Social Security payments.
“It would spread the burden across generations,” Smith said. Money from taxing net investment income would contribute to the program’s finances, “so it isn’t just the younger generation that has to pay for solvency,” she added.
Still, wealthy individuals know Social Security is running out of money, and it’s an “open secret” that they’ll likely be the ones who will need to make changes to course-correct the problem, said Driscoll of the Patriotic Millionaires group. But delaying any solution will only exacerbate the price tag.
“The longer we wait to fix Social Security, the more expensive it will be for all of us,” he said.