Saving Social Security With Payroll Taxes Alone Would Mean a 4.25 to 4.9% Hike. Here’s What That Costs the Average Worker

If you’ve been following the news on Social Security, you may be aware that the program’s finances are in trouble, and that retirees could be looking at a 22% benefit cut in just six years if lawmakers don’t intervene.

The reason boils down to a shrinking workforce. Social Security gets most of its funding from payroll taxes. If the ratio of workers to beneficiaries continues to shrink, which is what’s expected to happen, the program won’t be able to keep up with scheduled benefits unless Congress makes meaningful changes.

Now there are different options lawmakers can turn to in order to prevent Social Security cuts. Raising the program’s full retirement age is one potential solution, as is lifting or eliminating the wage cap that limits the amount of earnings taxed to fund Social Security each year.

Another option that’s gained traction is raising Social Security’s overall payroll tax rate. But it’s a change that could hurt the average worker in a serious way.

What a payroll tax rate change might look like

Social Security’s current payroll tax rate is 12.4%. Of that, workers are responsible for contributing 6.2% out of their paychecks while their employers cover the remaining 6.2% tax. Self-employed individuals have to pay the entire 12.4% tax on their wages.

Analysts estimate that the payroll tax rate may need to increase by roughly 4.25 to 4.9 percentage points to close Social Security’s funding gap. And that could burden the typical worker with a much larger annual tax bill.

The Bureau of Labor Statistics puts median weekly earnings at $1,251 as of the second quarter of 2026. On an annual basis, that’s about $65,000.

If we apply the current Social Security tax rate to that wage, the 6.2% worker portion amounts to an annual tax burden of $4,030.

However, if that rate were to increase to 16.85% split between employers and employees, it would leave workers paying 8.425% of their wages into Social Security. For the median annual wage, that raises that $4,030 tax bill to $5,476.

Meanwhile, if Social Security taxes increase by 4.9%, the employee portion would be 8.65%. Applied to a $65,000 wage, that’s an annual tax bill of $5,622.

Will lawmakers actually raise taxes?

Higher payroll taxes are a way to directly address Social Security’s funding shortfall and split the burden of preventing benefit cuts across workers of all income levels. Raising payroll taxes also forces businesses to be part of the solution.

For these reasons and others, it’s a solution that’s viable. However, the consequences could be harsh.

People who earn the median wage today may not be able to afford higher taxes. And while companies may be in a better position to absorb that hit, higher payroll costs could push businesses to slow hiring, reduce workplace benefits, and cut wages.

In other words, while companies might share the burden, they might pass much of the cost along to workers in the form of lower pay and fewer perks that create a financial hardship, such as higher contributions toward health insurance or less generous health plans that come with higher copays and deductibles.

All told, lawmakers need to do something to prevent Social Security cuts. Unfortunately, the workaround may end up being painful for not just the average worker, but workers on a whole.

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