Key Points – With the Social Security trust fund projected to be unable to pay full benefits by 2033, solutions are urgently needed.
-One prominent proposal, highlighted by the Peter G. Peterson Foundation, involves making more high-earner income subject to Social Security payroll taxes.
-Currently, only the first $176,100 of wage income is taxed. Eliminating this cap could raise $3.2 trillion over 10 years, closing over half the 75-year funding gap.
-While this would be a significant revenue boost, it would likely be viewed as a tax increase on higher earners. Public sentiment, per Pew Research, overwhelmingly opposes any benefit reductions.
The Social Security Crisis That Has No Easy Solution
We’re still waiting on the 2025 edition of the annual Social Security Trustees Report, which will show the health of the main Social Security trust funds. The 2024 edition of the report arrived on May 6, making this year’s already overdue.
According to the projections in last year’s report, the main trust funds for Social Security will continue to pay full benefits through 2033, after which they will pay reduced benefits.
Therefore, the Social Security program, which is both very popular and depended on by millions of Americans, will be in peril within the decade, and very few people in politics are talking about it.
Fixing the problem will likely require some changes to the formula by which Social Security benefits are calculated. Some ideas have been floated, including several proposed earlier this month by the Peter G. Peterson Foundation. And one of them is to
Raise the Cap on Social Security Taxes?
One proposal, included in the Peterson Foundation options, is to raise the Social Security Tax Cap.
“In 2025, workers will only pay Social Security tax on the first $176,100 of wage income. According to the Social Security Trustees, eliminating the Social Security tax cap while providing benefit credit for those earnings would raise an additional $3.2 trillion over 10 years — or close 53 percent of the 75-year funding gap.“, the proposal says.
“The Trustees also analyzed the revenue-raising effects of a different proposal. In that option, the tax cap would still partially exist, but wage income over $250,000 would also become subject to the 12.4 percent payroll tax and part of benefit calculation. As the tax cap increases with inflation, the gap between the ‘indexed cap’ and $250,000 would narrow until all wage income was subject to the tax. According to the Trustees’ projection, that option would raise $2.7 trillion over 10 years.”
Doing so, however, could be controversial and unpopular, since it would likely be positioned as a tax increase, while also falling in large part on higher-income earners.
The Peterson Foundation report also suggests that increasing the payroll tax rate by 1 percent would generate $601 billion over ten years.
“Proponents of increasing the payroll tax rate believe that it would be a relatively simple revision to administer because it would not involve major changes to the tax system,” the report says. Also, the Peterson Foundation supports “a balanced approach,” which would include “components from each option in combination would likely provide the fairest, most lasting, and least painful adjustment for the future.”
What the Data Says
Pew Research Center, citing its 2024 survey about Social Security, posted this week about Americans’ views of Social Security. In that survey, per Pew, 79 percent of U.S. adults said Social Security benefits “shouldn’t be reduced in any way – a view broadly shared across ages, racial and ethnic groups, partisan affiliations and income brackets.”
Also, according to Pew, in April 2025, 73.9 million beneficiaries received $134.5 billion from the Social Security program.
What is Trump Doing With Social Security?
Since Trump’s return to office, the DOGE cuts have resulted in the removal of a large number of Social Security personnel, which has reportedly already affected Social Security customer service. The Administration has also run through multiple acting Social Security Administration chiefs, until the confirmation of Frank Bisignano as SSA commissioner in early May.
Trump promised on the campaign trail to make Social Security tax-free, but according to a new report, the latest proposal in his reconciliation bill “ have now included in their spending and tax cut plan a new $4,000 tax deduction for seniors — which translates into an actual cash benefit of less than $500 for most retirees.”
Meanwhile, the Motley Fool reported this week that Trump’s tariffs may have affected the Social Security Cost-of-Living-Adjustment (COLA) adjustment for Social Security. That’s because that number is tied to inflation, which could increase under the tariffs.
About the Author:
Stephen Silver is an award-winning journalist, essayist and film critic, and contributor to the Philadelphia Inquirer, the Jewish Telegraphic Agency, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. For over a decade, Stephen has authored thousands of articles that focus on politics, technology, and the economy. Follow him on X (formerly Twitter) at @StephenSilver, and subscribe to his Substack newsletter.
The Social Security Challenge Explained
