According to the Social Security Board of Trustees annual 2022 report, Social Security’s money reserves will be fully depleted by 2034. Annual taxes are expected to cover only about 78% of the benefits each year after that.
By 2035, Social Security is projected to face significant financial challenges. The trust funds that help sustain the program are expected to be depleted, meaning benefits could be reduced unless changes are made.
Some estimates suggest that, without intervention, recipients may see a cut of around 17% to 25% in their benefits.
The federal government doesn’t charge Social Security payroll taxes on all income Americans earn during the year. In 2025, it only levies this tax on the first $176,100 a person earns.
Because of the way this is set up, ordinary Americans typically pay 6.2% (12.4%, split evenly between employee and employer) in Social Security payroll taxes on all of their income; meanwhile, many of the wealthiest Americans only pay the tax on a tiny fraction of their earnings.
With Social Security fast approaching its insolvency deadline, this low cap of $176K has become a target for those who want to keep the program sustainable without hurting ordinary Americans. Raising this ceiling would increase revenue for the program, without changing how much low- to middle-income workers pay into Social Security.
There are different versions of this plan. Some have suggested eliminating the cap, while others have proposed raising it to $400,000. The plan that Brookings Institute looked at involved raising the taxable-maximum ceiling 6 percentage points faster than under the current law, until it covers 90% of total wages. It estimated the program would reach this goal by 2039 if the change took effect in 2027.
Sources:
- https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html
- https://www.gobankingrates.com/retirement/social-security/what-will-social-security-be-in-2035/