The Social Security program just celebrated its ninetieth anniversary a couple of days ago, and while this is a major milestone, the future stability of this program—relied upon by millions—may be shakier than anyone would like. If a sustainable change is not made to the program now, a major trust fund is expected to be depleted less than a decade from now, resulting in an automatic cut to benefits.
According to the latest annual report from the Social Security Board of Trustees, the Old-Age and Survivors Insurance (OASI) trust fund will become insolvent by 2033, and if this fund is combined with the Disability Insurance trust fund, the combined fund will be depleted by 2034. If this shortfall does come to pass, beneficiaries would face a possible 19%–23% cut to their monthly benefit income.
As such, in a message to the public, the trustees wrote the following: “Lawmakers have many options for changes that would reduce or eliminate the long-term financing shortfalls. Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.”
Consequently, lawmakers have been debating possible solutions such as the creation of a new investment fund or increasing the Full Retirement Age further; however, nothing has been decided for sure yet. Another potential solution currently being weighed is doing away with the Social Security wage cap. Here is what you need to know.
What is the Social Security wage cap?
Social Security is funded primarily through a dedicated payroll tax in which 12.4% of a worker’s earnings are contributed—with the worker contributing 6.2% and the employer covering the other 6.2%. There is, however, also a limit regarding how much of your earnings are taxable, and this is known as the “maximum taxable earnings” or the Social Security wage cap.
This wage cap has increased over the years to account for inflation and wage growth, and from 2024 to 2025, the cap increased from $168,600 to $176,100. This figure will likely increase again in the upcoming year. In short, any income a worker earns above $176,100 in 2025 will not be considered when paying the Social Security payroll tax.
Is lifting the wage cap a sustainable solution to the projected shortfall?
According to the Committee for a Responsible Federal Budget, “raising Social Security’s wage cap by subjecting earnings above $250,000 to taxes could produce an additional $1.6 trillion in savings for the program between 2026 and 2035, closing 70% of Social Security’s 75-year solvency gap.” And while this could make a meaningful difference to the program’s finances, a 30% solvency gap would remain, which means benefits would still have to be cut—just by a smaller margin.
Furthermore, the SSA has a maximum benefit amount that it pays out, which works because there is a wage cap in place. If this cap is eliminated or raised and higher earners contribute significantly larger amounts—but benefit amounts remain capped at current levels—this will most likely become a point of contention for many.
Social Security is an insurance program, meaning that what you put in is what you get out at a later stage. This means that if the wage cap is lifted, things would also have to change in the program at a foundational level with regard to how benefit amounts are calculated. If the benefit formula remains unchanged but the wage cap is raised or eliminated entirely, then high earners will inadvertently be subsidizing the benefits of lower earners.