The Payroll Tax Cap, Not the Deficit, Is Starving Social Security

The National Review editorial board wants you to take the hit for a hole someone else dug. In “Social Security Insolvency Creeps Further Up”, The Editors argue that the trust fund’s approaching insolvency means Congress must raise the retirement age and slow benefit growth — because “simply taxing the rich won’t close such an enormous gap.” They spend nine paragraphs on the arithmetic of cuts and exactly zero noticing that every dollar of wages above $184,500 escapes the Social Security payroll tax entirely. Your paycheck is taxed on every dollar. A hedge fund manager’s millions are exempt after February — the $184,500 cap for 2026 gets hit almost immediately when you’re earning millions. A software engineer earning $350,000 pays the exact same dollar amount into the system as a tenured public-school teacher at the cap.

The editorial is a cleanly argued, honestly worried piece of work. I’ll grant the true half first, because it’s a real one: the trust fund is an accounting convention, not a Vanguard account. The program has been paying out more than it takes in, and the gap is widening as the ratio of workers to retirees shrinks. An aging population really does put pressure on a pay-as-you-go system, and pretending otherwise is the other side’s version of the dodge I’m about to unpack. The editorial is not wrong that demographics are the underlying driver. It is, however, scrupulously silent about who, exactly, gets a pass on paying for it.

Here is what the editors do not say, and it is the only number that matters: if you eliminate the cap — make all earnings subject to the payroll tax, the way Medicare already does — every dollar of earnings, no ceiling — you close the great majority of the projected 75-year shortfall. The Social Security Administration’s Office of the Chief Actuary has published solvency provisions on this exact option — eliminating the taxable maximum with no benefit credits, provision E2.1 in their options menu — and every serious official scoring, from the Social Security actuaries to the Congressional Budget Office, shows it covers the lion’s share of the gap. The shortfall does not vanish entirely; a small residual remains from demographic shifts. But the “enormous gap” the editors call unclosable without benefit cuts is, on the plain arithmetic, mostly a gap created by the decision not to tax the rich in the first place.

The cap is not a bug that slipped into the bill when nobody was looking. In 1983, when Congress last made a serious fix, about 90 percent of total wages fell under the cap. Today it’s closer to 83 percent. That seven-point drift isn’t an act of God. It’s what happens when the people earning the most money pull away from the rest of the wage distribution, and nobody adjusts the tax structure to follow them.

“Simply taxing the rich won’t close such an enormous gap.” That sentence is doing a lot of work. It is true only if by “taxing the rich” you mean something narrower than “asking them to pay the same rate that everyone else already pays on every dollar they earn.” That is not a new tax. It is the removal of a regressive exemption that has no economic rationale except to shelter high incomes from a tax everyone else pays in full. The editors would prefer you to hear “tax the rich” and picture some exotic new wealth confiscation — a yacht levy, an unrealized-gains surcharge — rather than the boring, fully-scored, decades-on-the-shelf fix that simply erases the ceiling and makes the payroll tax flat. Which is exactly what it was supposed to be.

The true entitlement crisis, the editorial argues, is not the trust fund insolvency but the enormous public debt driven by the program’s shortfalls, which could eventually spook bond markets and force austerity. That is a genuine worry, but notice how the sequence works. Step one: rule out the obvious revenue fix by pretending it doesn’t exist. Step two: define the resulting shortfall as a debt crisis that can only be resolved by cutting benefits. Step three: present benefit cuts as the prudent, grown-up choice. The entire structure works only if you ignore the cap. Restore the cap and the “crisis” becomes a manageable residual gap, not an existential fiscal emergency.

The choice on the table is this: we can ask a sixty-seven-year-old retired machinist to live on a 22 percent smaller check — the cut the program’s own trustees project if Congress does nothing — or we can ask the bond trader who earned $2 million last year to pay Social Security tax on all of it. The editors have chosen the machinist. They will frame that choice as fiscal responsibility, as hard-nosed realism, as the last resort of serious people dealing with unforgiving math. But the math is only unforgiving if you write the cap into it as a permanent fixture — if you treat an exemption that benefits the top 6 percent of earners, per SSA data, as though it were a law of nature, like the gravitational constant.

So what gets built instead? Remove the cap. Not phase it out over thirty years, not study it for a commission. Apply the payroll tax to every dollar of earnings, as Medicare already does — every dollar of earnings, no ceiling. With the remaining gap, which is smaller, you can make the tweaks that honest people on both sides of the argument already agree on: raise the full retirement age by a year or two for workers who are still decades from retirement, modestly adjust the COLA formula to better reflect the actual spending patterns of seniors, maybe bring new state and local government hires into the system. None of this is radical. All of it is scored, documented, sitting in the Congressional Budget Office’s options reports waiting for a Congress that is not afraid of the people who fund its campaigns.

The real crisis is not that Social Security is unaffordable. It is that a political class funded by people who benefit from the payroll tax cap has spent forty years convincing itself — and you — that the only way to save the program is to cut benefits for the people who already paid in a full career’s worth of taxes on every dollar they earned. The economy is a set of choices, not the weather. Somebody decided that your wages get taxed on every dollar and a CEO’s does not. That’s not arithmetic. That’s a choice. And it can be unmade.