Social Security could be stabilized by taxing high earners more – is eliminating the payroll cap the answer?

Key Points

Social Security’s looming insolvency has renewed calls from some circles to lift the $176,000 cap on FICA withholding tax.
Politicians protesting DOGE’s exposure of massive Social Security fraud and misappropriation by Congress are instead insisting that Social Security beneficiaries take later retirement or a cut in benefits.
Conventionally, a combination of policy changes and aggressive cuts in wasteful and fraudulent Social Security spending is likely the best middle ground compromise solution to shore up the Social Security trust fund’s shortfall. However, the DOGE cut proposals can drastically mitigate much of these measures, if enacted.
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By John Seetoo Published May 17, 2025 at 9:43 AM EDT

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Social Security could be stabilized by taxing high earners more – is eliminating the payroll cap the answer? — © Egoitz Bengoetxea Iguaran from Getty Images and JJ Gouin from Getty Images

According to several economists, the Social Security trust fund is on track to become insolvent by 2035, unless there are some drastic changes made. To replenish the fund, Social Security needs to either augment inflows, reduce spending, or enact some combination of steps that does both. Recent legislative changes, such as the Social Security Fairness Act, have modified certain provisions, but there is no comprehensive systemic reform currently underway.

On the augmentation side, the proposals from politicians reluctant to cut spending include and increase taxation:

Raising FICA tax rates from 12.4% to 15.7%.
Lifting the $176,100 FICA earnings cap so that higher earners who will draw benefits in the future continue to contribute.
Limitation on the employer health care insurance exclusions to payroll tax.

On the spending reduction side, the proposals on the table are as follows:

The $25,000 individual and $32,000 couple thresholds for taxing Social Security benefits have not been adjusted for inflation since the 1980s. Their 2025 equivalents equate to $81,500 and $104,400.
Increasing the retirement age to 70.
Reduce COLA.
Index benefits to longevity.
Modify benefits to higher income retirees.

Social Security Fund Rescue Measures – Varying Opinions

Raising or eliminating the FICA withholding threshold of $132,000 is a popular suggestion for helping to shore up Social Security, but other measures are needed as well.

In response to a Reddit post that cited raising or eliminating the FICA earnings cap, a number of respondents posed a range of views from both sides of the fence. Some of the more interesting ones include:

Support for raising the cap, but extreme pessimism over getting it approved, since many of the ones who would be impacted are believed to be big campaign donors.
Another cynically stated that Congress should pay back all of the funds it borrowed from the Social Security trust fund for their other wasteful and useless spending projects and graft.
One suggestion was to disqualify Social Security benefits to anyone earning over $1 million annually.
A few respondents in the top bracket stated that they would be willing to contribute their equitable share under a lift the FICA cap, since it would be beneficial to others in a restoration of fairness.
One interesting perspective stated that a large number of higher earners already pay sizable amounts into employee health programs, pensions, and they represent over 60% of those who pay income tax, so additional taxes imposed on them could easily be seen as unfair and confiscatory.

Compromise Solutions and The DOGE Answer

Elimination of waste and fraud are essential parts of the Trump Administration’s plan to rescue Social Security.

Going on the premise of Social Security remaining as it is systemically and focusing merely on the trust fund, compromise solutions seem to be the more logical course of action.

One interesting compromise suggestion was to eliminate the FICA withholding cap, but reduce overall payroll tax by 70% after the current cap to be more palatable for higher earners. Additionally, adjusting for inflation for the past 40 years should definitely be taken into account as well.

However the Social Security system itself is already undergoing reform that should result in greater efficiency and reduction of errors.

On April 15th, President Trump signed a memorandum reinforcing the prohibition on undocumented immigrants receiving Social Security benefits, reiterating existing law. This memorandum ties to other measures designed to eliminate other aspects of Social Security waste and fraud, such as payments going to unverifiable IDs with Social Security numbers and to those who are deceased.

Additionally, it was discovered that $3.3 billion in Social Security overpayments in fiscal year 2023 were going to be recouped through withholding in the future. In 2025, the Social Security Administration reduced the maximum rate at which it withholds benefits to recoup overpayments from 100% to 50% for most recipients, in response to concerns about the impact on fixed-income seniors.

Social Security has many problems that can luckily be solved. While practical measures have repeatedly been echoed, the political will to put them in motion has long been the missing component. Finally, it appears to be in place and already at work.