Payroll-tax cap repeal and solvency commissions lead proposals under discussion
Social Security faces automatic 22% benefit cuts in 2032 absent congressional action, and lawmakers from both parties are publicly weighing specific proposals to prevent them, including eliminating the payroll-tax cap and creating bipartisan commissions empowered to expedite solvency legislation. The Wall Street Journal reported Sunday that discussions on the government’s largest program accelerated this summer with actuarial warnings, congressional hearings, and scattered bipartisan efforts.
Members of both parties told the Journal they intend to act before the automatic cuts take effect. “I do not believe that we’ll ever hit the wall, because I think funding will be derived, because we can’t let it hit the wall — no matter what,” said Sen. Jim Justice (R., W.Va.). The trust fund’s projected exhaustion date has been accelerated by lower fertility, slower immigration, and provisions in Republicans’ 2025 tax law, according to actuarial projections reported by the Journal. By waiting this long, lawmakers made the eventual adjustment more severe: tax or spending changes that could have been implemented years ago are now no longer large enough to close the funding shortfall between expected revenue and promised benefits.
The most prominent bipartisan pairing involves Sens. Bernie Moreno (R., Ohio) and Elizabeth Warren (D., Mass.), who are jointly proposing elimination of the cap on Social Security payroll taxes. The 12.4% tax, split between employees and employers, ends once wages and self-employment income hit $184,500 this year. Moreno and Warren argue it is unfair that higher-income workers pay a smaller share of their income than most people do.
The two senators have not released a bill or stated whether they would expand the tax to investment income. They also have not said whether they are proposing a tax increase only or would keep the current program structure, in which additional income subject to taxes would qualify affected workers for larger future benefits. For now, no other Republicans have joined Moreno, and removing the cap would push top marginal tax rates on wages above 50% in high-tax states where many Democratic voters live — making it, according to the Tax Foundation, the largest tax increase in over 40 years.
A separate pair of lawmakers — Reps. Tom Cole (R., Okla.) and Tom Suozzi (D., N.Y.) — is supporting a bill that would create a bipartisan commission and guarantee expedited votes if the panel offers a plan for 75-year solvency. A bipartisan Senate group including Sen. Tim Kaine (D., Va.) has floated a similar idea for fast-track consideration of a board’s plans for 50-year solvency.
Kaine backs two bipartisan bills: one would empower an advisory board to expedite legislation, and the other would borrow to create an investment fund to bolster the program. Both ideas have significant detractors, and the leading Republican sponsors are retiring. “I want the public to see, like, we’re not sleepwalking here,” Kaine said. “We’ve got to now convert it into action.” Cole cited the precedent of the 1983 commission that produced the last major round of Social Security changes, which helped defuse the issue for the 1984 campaign. “It’s an approach that’s been proven before,” he said. “Everybody puts their fingerprints on it.”
Andrew Biggs of the American Enterprise Institute, a senior Social Security official during the George W. Bush administration, called the 1983 model “fine” but said “the task is much, much harder now.” Biggs said Republicans are “very afraid of the issue” and “just don’t know what they want.”
Any fixes will almost certainly be bipartisan. Unless the Senate abolishes the filibuster, Social Security changes require 60 votes. Such adjustments are not eligible for the special budget reconciliation process used to pass Trump’s 2025 tax law, which needed only a simple majority.
Congress can, in the interim, use Social Security’s disability fund to push insolvency to 2034. Even absent that move, some near-term general-fund transfer or borrowing is likely, said Shai Akabas, vice president of economic policy at the Bipartisan Policy Center. There are few other realistic ways to close a hole exceeding $450 billion in 2033, he said; the key is limiting those transfers while finding secure long-run footing. Achievable long-term solvency could come through a mix of smaller benefits, higher taxes, or new dedicated revenue.
Many Democrats are dead-set against reductions in promised benefits and oppose commissions and boards designed to broker compromises. Sen. Bernie Sanders (I., Vt.) and others have even proposed some benefit increases. “Progressives need to go into this with the assumption that there will be no benefit cuts, nothing significant,” said Michael Linden, senior policy fellow at the Washington Center for Equitable Growth. “No retirement age increase.”
If enacted now, a plan removing the payroll-tax cap and denying new benefits to affected workers would close about two-thirds of the long-term hole. “The problem really can only be solved by something that the vast majority of the American public are supportive of — and that is scrapping the cap on income,” said Martin O’Malley, who ran Social Security during the Biden administration.
Sen. Ron Wyden (D., Ore.), the top Finance Committee Democrat, said he is focused on eliminating disparities between middle-class workers and high-income people, including taxing billionaires’ unrealized capital gains. He demurred when asked about payroll-tax changes. “At the beginning of this, you don’t go negotiating with yourself,” Wyden said.
In the pre-Trump era, Republicans pushed ideas such as a higher retirement age and slower cost-of-living increases. In 2005, President George W. Bush advocated a partial privatization plan that failed to advance. In 2016, Donald Trump ran on promises to block benefit cuts, taking steam out of those earlier efforts and holding a no-cuts posture that he maintains today. “Under his leadership, there will be zero reductions to Social Security payments,” said Liz Huston, a White House spokeswoman.
Senate Finance Committee Chairman Mike Crapo (R., Idaho) backed Social Security tax increases and benefit reductions in 2010 within a broader fiscal plan that failed. He is trying to start discussions but does not necessarily support those proposals now. “I haven’t actually gone back and evaluated how they would work in today’s economics, so I’m not going to have an opinion on that,” Crapo said. “It’s a new dynamic.”
Outside groups, such as the Committee for a Responsible Federal Budget, have floated ideas for reducing benefits and raising revenue, including giving smaller cost-of-living adjustments to higher-income beneficiaries and capping annual benefits at $100,000 per married couple.
For inspiration, lawmakers point to 1983, when bipartisanship prevailed just months before the insolvency deadline. But the financial hole is deeper this time around.