Lawmakers float tax hikes, benefit caps as Social Security deadline nears

Social Security faces a projected funding gap that would cut benefits by 22% starting in 2032 unless Congress changes the program, Fortune reported, citing new projections released this month. The deadline is forcing lawmakers to weigh tax increases, benefit limits and investment plans that carry political and financial risks.

Payroll tax revenue has fallen short of current benefit costs for years, according to Fortune, with the trust fund covering the difference. Once that fund is depleted, the program would be able to pay only what it collects.

The timing means senators elected in this year’s midterm races are likely to face votes on a fix, Fortune reported. Several proposals are already in circulation.

Raising payroll tax revenue

Sens. Bernie Moreno, R-Ohio, and Elizabeth Warren, D-Mass., have proposed removing the cap on wages subject to Social Security payroll taxes. In a New York Times op-ed, the senators argued that the current structure taxes all earnings for most workers while shielding some income for the highest earners.

Under current law, Social Security payroll taxes apply to annual wages up to $184,500, according to Fortune. Moreno and Warren cited a Peter G. Peterson Foundation estimate that eliminating the cap would raise about $3 trillion for Social Security over 10 years.

Sen. Sheldon Whitehouse, D-R.I., and Rep. Brendan Boyle, D-Pa., have offered a different revenue plan, Fortune reported. Their proposal would raise the taxable wage threshold to $400,000 and apply the levy to investment income.

Using markets and new borrowing

Sens. Bill Cassidy, R-La., and Tim Kaine, D-Va., have proposed a plan that would keep benefits intact without raising taxes, according to Fortune. Their approach would use federal borrowing to create an investment fund holding stocks and other risk assets.

The plan would borrow $1.5 trillion for that fund and let it build returns over 75 years, Fortune reported. It would also require $25.1 trillion in additional borrowing to cover Social Security’s revenue gap over that period, with investment gains expected to help repay the combined $26.6 trillion.

Boston College’s Center for Retirement Research tested the idea and found it was unlikely to succeed, according to Fortune. Researchers Anqi Chen, Alicia Munnell and Jean-Pierre Aubry wrote that market volatility means the expected stock gains would not reliably cover the plan’s costs.

Capping some benefits

The Committee for a Responsible Federal Budget has proposed limiting benefits for couples receiving $100,000 or more a year from Social Security, Fortune reported. The group calls the proposal the “Six-Figure Limit.”

The cap would vary by marital status and retirement age, according to Fortune. A single recipient would be limited to $50,000, while a married couple claiming at 62 would face a $70,000 cap.

Sen. Lindsey Graham, R-S.C., showed openness to limits on the highest benefits during a Senate hearing in March, Fortune reported. Graham said he once relied on survivor benefits after his parents died but could now manage with less if that helped preserve the program.

Trump accounts and a longer-term shift

Sen. Ted Cruz, R-Texas, has linked so-called Trump accounts for children to a broader conservative effort to change retirement financing, according to Fortune. The One Big Beautiful Bill Act allowed parents and other authorized people to open tax-advantaged savings accounts for children under 18 who have Social Security numbers.

At a Milken Institute Global Summit panel, Cruz said U.S. conservatives have looked to Australia’s superannuation system, which requires employers to contribute to workers’ retirement investment funds, Fortune reported. Cruz predicted that parents who watch children’s accounts grow may become more willing to redirect part of payroll taxes into similar accounts.

This story draws on original reporting from Fortune.