If you're one of the more than 68 million Americans who depend on Social Security, you probably can't imagine your life without it. While some argue that these checks don't go far enough, they're still a reliable source of monthly income. So it's natural to be worried about Social Security being less than a decade away from insolvency.
Politicians and experts have thrown around several ideas for how to increase the program's funding to avoid benefit cuts. One that's struck a chord with most Americans is forcing the wealthy to pay more in Social Security payroll taxes. It's easy to see why. The majority of Americans would benefit from this move without feeling any negative consequences.
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Unfortunately, fixing Social Security's funding issues isn't that simple. But taxing the wealthy could be part of a broader Social Security reform strategy that'll likely start to crystallize in the coming years.
Why taxing the rich would help Social Security
Social Security currently has about nine years until its trust funds are depleted. Beginning in 2035, the program's projected income would only be enough to cover about 83% of scheduled benefits. That would result in a 17% cut to all beneficiaries, unless the government makes some major changes.
It could use several strategies to resolve this issue, including reducing benefits for some or all Americans. But that's understandably not popular with people who rely upon the program.
Increasing the program's revenue is a more appealing solution, and in the hunt for more money, the Social Security payroll tax cap has found itself under the microscope. In 2025, Americans only pay Social Security taxes on the first $176,100 they earn. That means ordinary workers owe these taxes on all their annual income, while the wealthy may only owe these taxes on a small fraction of their annual income.
In the past, the taxable wage cap was high enough to cover at least 90% of total wages, but now the number is closer to 80%, according to Brookings. Increasing or eliminating the payroll tax cap would give Social Security billions of dollars to put toward future benefits. But it's not enough to permanently resolve the program's funding issues.
It would only close about half the shortfall
The latest projections indicate that if the government began subjecting all earned income to Social Security payroll taxes beginning in 2025, it would reduce the program's shortfall by about 53%. That would be enough to keep the program afloat for another few years, but we'd be back in a deficit by 2029, according to the Manhattan Institute.
This is largely due to the sheer size of the deficit, but it's also worth noting that under the current benefit formula, your monthly benefit amount in retirement depends on how much money you paid Social Security payroll taxes on throughout your career. If high earners began paying more into the program, they'd also be entitled to take more out of it, so this increased spending would offset some of the gains the higher tax revenues would bring.
Some have argued that the government should eliminate the payroll tax cap without any accompanying benefit increase for the wealthy. This would buy Social Security more time. It might last as long as 2060 before its trust funds are depleted, per the Manhattan Institute. But, again, it's not enough.
The reality is that no single strategy can get Social Security back on a good financial footing. It will take a combination of approaches, most of which lack the broad appeal of upping taxes on the rich.
Payroll tax increases are likely. Direct or indirect benefit cuts -- such as raising the full retirement age (FRA), which would increase the early claiming penalty for younger workers -- remain a possibility. But only time will tell.
It'll ultimately be Congress's decision. We can share our thoughts and opinions with our Congressional representatives. But beyond that, we have to focus on what we can control. Workers should do their best to set aside retirement savings so they're less dependent on Social Security in retirement. Seniors may also be able to supplement their checks with savings or income from a job. Once we know what Social Security reforms the government plans to make, it'll be time to go back to the drawing board and figure out how our checks will fit into our budgets going forward.
