Social Security’s retirement reserves could be exhausted as soon as 2032. Recent policymakers’ ideas to save this fund revolve around requiring America’s top earners contributing more without receiving any additional benefits in return.
Massachusetts Senator Elizabeth Warren continues to take to social media to generate public pressure on the Social Security cap – a maximum of how much a taxpayer earns before they are no longer contributing to Social Security. In 2026, wages above $184,500 are not subject to the 6.2% Social Security tax. This notion leads some to feel the tax is regressive.
Her efforts have helped move this idea from a tweet to a movement. In June, Warren teamed up with Ohio Republican Senator Bernie Moreno on a New York Times op-ed calling on Congress to eliminate the cap entirely. They would require workers to pay Social Security tax on every dollar of their wages, not just the first $184,500, in a move that would provide much needed funding to this fund.
However, their social media praise for their plan to reform Social Security leaves out an important nuance – taxpayers with income of $184,500 would not receive any incremental Social Security benefits. That is, a taxpayer earning $1,000,000 in wages would pay 6.2% of their earnings in Social Security tax, but they would only receive the same benefits as somebody earning $184,500 in earnings.
This aspect makes the proposal less a Social Security contribution than a straightforward tax-rate increase on high-income taxpayers. Like any tax rate increase, this one comes with intended and unintended consequences.
What Is The Social Security Cap, And Why Does It Exist?
Social Security is a federal social insurance program funded through payroll taxes. Under Social Security, employees pay 6.2% of their wages, and employers match it with another 6.2%, for a combined 12.4%. Self-employed workers pay the full 12.4% themselves.
Since the retirement benefits are only designed to provide taxpayers with a cushion for their retirement, the tax applies only up to a ceiling, which is $184,500 in 2026. This amount rises each year with the national average wage. Once a worker’s wages pass this dollar amount, no more Social Security tax is withheld for the rest of the year. Thus, the most an employee can pay in 2026 is $11,439, even though they may have taxable income that goes well beyond that.
Because the tax is no longer imposed after the cap is reached, some have argued that the tax is regressive – a worker earning $60,000 pays 6.2% of their wages to Social Security while another worker earning $1,000,000 pays only about 1.1%. Meanwhile, a billionaire who earns all of their income from investments pays nothing in Social Security since those proceeds are not subject to the Social Security tax.
The reason to have a cap is that it mirrors the benefits that a taxpayer can receive from Social Security. Earnings above the cap do not count toward the Social Security that they can expect to receive upon retirement. The symmetry between wages paid into Social Security and benefits received upon retirement is key to understanding some of the finer points of Warren’s proposal. If the cap gets removed and higher-earners no longer receive more benefits, then the symmetry is no longer present.
The program’s costs now exceed its income, and the Tax Foundation puts the 75-year shortfall at about $25 trillion. The cap itself is part of that story. According to the Tax Foundation, the share of total wages covered by the payroll tax has fallen from about 90% in 1982 to roughly 83% today, because wages at the top have grown faster than everyone else’s.
Elizabeth Warren’s Proposed Social Security Fix
While Warren’s recent proposal has been receiving attention, this is not her first attempt to fix Social Security. Her earlier plans, including the Social Security Expansion Act with Sen. Bernie Sanders, reapplied the tax to earnings above $250,000 and used the money to expand benefits.
The current version takes a broader approach. In their June 23 op-ed, Warren and Moreno call for eliminating the Social Security cap, applying the 12.4% tax to all wages. Warren and Moreno frame this change from the perspective of fairness since most Americans pay Social Security tax on 100% of their earnings, while top earners pay on only part of theirs.
Eliminating the Social Security cap would bring in roughly $3 trillion over 10 years for the struggling fund, according to Warren and Moreno. They also cite a 2025 Bipartisan Policy Center poll finding that 65% of Democrats and 62% of Republicans support lifting the cap.
What Warren and Moreno’s proposal does not include is any increase in benefits for the people paying the new tax. The op-ed is entirely about bringing more money in, and the Tax Foundation reads it as applying the tax to all earnings with no corresponding change to benefits. As the legislators have not formally introduced a bill, it can be difficult to know how these actions will play out. However, in its current form, their proposal would be for high-income taxpayers to pay more in Social Security without receiving any incremental benefits.
The Case For Lifting The Social Security Cap
The strongest argument for lifting the Social Security cap is vertical equity. This principle suggests that people with greater ability to pay taxes should bear a larger share of the tax burden. Today the payroll tax runs the other way at the top. A taxpayer’s tax liability percentage for Social Security decreases in their wages as they move past the cap.
For supporters, the absence of new benefits is a feature designed to promote an overall stronger vertical equity. Every extra dollar high earners pay stays in the Social Security fund instead of flowing back out to them in retirement.
The revenue that can come into the fund is also very appealing. The Tax Foundation estimates $3.2 trillion from 2027 through 2036 in incremental Social Security funding before accounting for economic effects. The higher taxes would fall on high earners and their employers; roughly 94% of workers earn below the cap and would see no change.
Importantly, this proposed change would also buy policymakers time to help determine the future of this fund. Social Security’s actuaries estimate that eliminating the cap without adding benefits would close about two-thirds of the 75-year shortfall. Thus, while it would not be the only fix needed, it would be a big one that can be used to increase the health of Social Security in the U.S.
The Case Against Lifting The Social Security Cap
While the benefits are clear, the proposal’s design leaves some potential flaws that could doom this change from the start.
Social Security already favors lower earners. Taxing wages above the cap without crediting them toward benefits would mean high earners would increase their contributions without receiving any incremental benefits. At that point, the tax above the cap is no longer a retirement contribution. Rather, it is simply another income tax.
This important feature could change how the public sees the program. Social Security’s political durability rests on the idea that workers earn their benefits. If that link were to weaken, some could argue it would make it easier to adjust it further in the future and make it even less advantageous for high-income taxpayers.
This potential tax increase comes at a time when many are pushing for higher taxes on the rich. Stacking an incremental 6.2% in taxes on top of taxpayers who are already facing as much as 50.3% income tax rates (combined federal and state rate for a taxpayer in California earning over $1 million) could deter taxpayers from exerting effort. The Tax Foundation estimates this proposed change would reduce long-run GDP by 1.5% and cost 1.8 million jobs, and that the 10-year revenue would fall to about $1.5 trillion once those effects are included.
Finally, employers pay half of the Social Security tax. A 6.2% expense on every dollar of high salaries could show up in slower wage growth or reduced hiring for those roles.
What Is The Future Of Social Security Reform?
A bill to reform Social Security of this nature has yet to be formally proposed in the House or Senate. Furthermore, Because Social Security changes cannot pass through budget reconciliation, any bill would need 60 votes in the Senate. Thus, this proposed change has a long way to go.
Every year without action in reforming Social Security brings the 2032 depletion date closer. Lifting the cap will almost certainly be part of that debate as to how to achieve this reform. Whether it survives in its current form, with no new benefits for the people paying the new tax, is a much harder question.
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