A person holds a sign that reads “Save Social Security” during a rally against President Donald Trump’s tax plan near the U.S. Capitol on April 10, 2025 in Washington, D.C.
Brian Dozier AFP | Getty Images
Washington state lawmakers set a new deadline for fixing Social Security’s retirement trust fund based on a new annual report released this month by the program’s governing board.
According to the Social Security Administration’s latest projections, the trust fund known as Old Age and Survivors Insurance (OASI) could be depleted in the fourth quarter of 2032, at which point 78% of benefits will be paid out.
The new projections are several months earlier than previous projections for the fund, which Social Security relies on to pay monthly benefits to millions of retired workers, their spouses and children, and survivors of deceased workers.
This led to a new push to tax the wealthy to shore up the program’s finances.
On Tuesday, Sen. Elizabeth Warren (D-Mass.) and Sen. Bernie Moreno (R-Ohio) wrote a joint op-ed saying they are collaborating on a bill that would eliminate the payroll tax cap to improve Social Security’s solvency.
Currently, income up to $184,500 is subject to Social Security payroll taxes. Once high-income earners reach that cap, they no longer participate in the program for the rest of the year. On March 9, individuals with annual wage and salary income of $1 million stopped paying Social Security payroll taxes for 2026, according to the Center for Economic Policy Research.
At Wednesday’s Senate Finance Subcommittee hearing on the future of Social Security, Sen. Bernie Sanders (R-Vt.) said it’s time to “demand that the wealthiest people in this country, who have never been so well off, start paying their fair share of taxes.”
Sanders has proposed the Social Security Expansion Act, co-sponsored by Warren and nine other Senate Democrats, which would increase taxes on wages, salaries and self-employment income above $250,000 while increasing certain benefits. The proposal also calls for increasing net investment income taxes while subjecting active trade or business income to those taxes.
Another bill, the Social Security 2100 Act, sponsored by Rep. John Larson, D-Conn., would make income over $400,000 subject to Social Security payroll taxes and increase benefits. The proposal was introduced in 2023, but has not been reintroduced to Congress this year. There were 189 Democratic co-sponsors.
Larson said in a statement that Moreno’s endorsement is a “major step forward” in Democratic leadership’s efforts to build a coalition to address the issue.
Payroll tax caps are adjusted annually to match national wage growth. As a result, the difference between that wage base and the threshold at which payroll taxes are reapplied (whether that’s $250,000 or $400,000) will eventually narrow over time.
Uneven wage growth rates affect social security payment ability
Social Security reform, enacted in 1983 when the program was underfunded, was intended to provide 75 years of solvency, which would have extended the program until 2058.
But that period has been cut short, largely due to widening income inequality and the impact of the Great Recession, said Stephen Nuñez, director of stratified economics at the Roosevelt Institute, a left-leaning think tank.
Nuñez said that in 1983, the Social Security payroll tax cap was enough to cover 90% of eligible income, and the reforms envision that continuing to be the case.
But by 2000, FICA taxes accounted for only about 82.5% of taxable income and have remained there, he said.
“At a time when the program was intended to increase reserves, this was a significant, significant reduction in projected revenue,” Nunez said.
The extent to which raising the payroll tax cap would expand Social Security’s ability to pay today will depend on specific changes, such as whether it is combined with increased benefits.
Social Security was created to provide basic economic security in the event of loss of wages due to old age, disability or death, Nancy Altman, president of Social Security Works, an advocacy group focused on expanding benefits, said at a Senate subcommittee hearing Wednesday.
The first question that reform should address is: “What level of benefits should Social Security provide?” Altman said.
Current benefits are “effectively low at best,” she says. Altman said benefit cuts would hurt retirees who are already struggling financially as well as financially.
But if these tax increases were imposed on pass-through small businesses whose profits are included on their owners’ personal tax returns, they could hurt their ability to invest in growth and create jobs, Elizabeth Milito, vice president and executive director of the National Federation of Independent Business Small Business Legal Center, said at a Senate subcommittee hearing.
In response, Sanders said his bill would exempt the “vast majority” of small business owners who fall below the $250,000 threshold from paying the additional tax.
Bipartisan compromise can be difficult
However, it remains to be seen whether lawmakers on both sides of the aisle are willing to pass the tax increase.
“The current value of Social Security’s unfunded liability is a staggering $30 trillion,” Sen. Chuck Grassley (R-Iowa), chairman of the Senate Finance Subcommittee on Social Security, Pensions, and Family Policy, said during Wednesday’s hearing.
“This fiscal hole cannot realistically be closed by raising taxes on the wealthy, the solution favored by Democrats, or by cutting waste, fraud, and abuse, the solution favored by Republicans,” Grassley said.
Shai Akabas, deputy director for economic policy at the Bipartisan Policy Center, said at a Senate subcommittee hearing Wednesday that any new reforms to Social Security must be bipartisan. Senate rules require 60 votes to pass Social Security reform, but “no party is likely to get there alone,” he said.
Akabas said the Bipartisan Policy Center, a think tank that promotes bipartisanship, agrees that raising the tax cap on Social Security should be considered as part of comprehensive reform.
But he said there are limits to raising taxes to address all the problems that need to be solved, such as eliminating the growing federal deficit.
“We believe there needs to be a balance that includes both additional revenue to the program and benefit adjustments,” Akabas said.
