Washington lawmakers push to lift Social Security payroll tax cap as funding pressure builds

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Social Security tax cap debate

Highlights

Social Security trustees now project the Old-Age and Survivors Insurance trust fund depletion in Q4 2032, advancing the date by several months and triggering renewed debate on increasing payroll taxes.
Under current law, payroll taxes apply to wages up to $184,500, so individuals earning $1 million in 2026 stop paying Social Security payroll taxes by March 9.
Senators Elizabeth Warren and Bernie Sanders advocate removing the payroll tax cap above $250,000 and expanding benefits, while Rep. John Larson's separate proposal targets income above $400,000.

Trust fund deadline sharpens tax debate

As reported by CNBC, Social Security trustees said this month that the Old-Age and Survivors Insurance trust fund may be depleted in the fourth quarter of 2032, at which point 78% of benefits will be payable under current projections.

The updated estimate moves the expected depletion date several months earlier than previously projected. The fund helps pay monthly benefits to millions of retired workers, their spouses and children, and survivors of deceased workers.

That outlook is renewing calls from some lawmakers to raise payroll tax collections from high earners. Under current rules, wages up to $184,500 are subject to Social Security payroll taxes, meaning workers with much higher incomes stop contributing once they reach that threshold for the year.

According to the Center for Economic and Policy Research, individuals earning $1 million annually in wages and salary income stopped paying Social Security payroll taxes for 2026 on March 9.

Competing proposals target high-income wages

Sens. Elizabeth Warren and Bernie Moreno said in a Tuesday opinion piece that they are working together on legislation to lift the payroll tax cap as part of an effort to improve Social Security's solvency.

At a Senate Finance subcommittee hearing on Wednesday focused on the program's future, Sen. Bernie Sanders said the wealthiest people in the country should pay a greater share in taxes. Sanders has proposed the Social Security Expansion Act, backed by Warren and nine other Senate Democrats, which would apply taxes to wages, salaries and self-employment income above $250,000 while also expanding certain benefits.

The proposal also calls for increasing the net investment income tax and applying those levies to active trade or business income. A separate measure from Rep. John Larson, the Social Security 2100 Act introduced in 2023, would subject income above $400,000 to Social Security payroll taxes while also increasing benefits, though it has not been reintroduced in the current session of Congress.

Our earlier report on an off-the-books payroll scheme in the U.S. detailed how a network linked to construction subcontractors allegedly enabled cash payments that bypassed required payroll tax withholding and reporting. Prosecutors said the operation moved about $89 million over several years and resulted in more than $38 million in tax losses, underscoring how payroll-tax compliance can materially affect public revenues.

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