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Could raising the payroll tax rate save Social Security?
NewsNation • • business
Key Points:
- Social Security faces long-term funding challenges, prompting bipartisan calls to raise or eliminate the payroll tax cap to strengthen the program’s finances.
- The latest Trustees Report warns of a potential 22% benefit cut starting in 2032 if the retirement trust fund is depleted, while raising the payroll tax cap could help avoid or reduce these cuts.
- Currently, the payroll tax rate is 12.4% on wages up to $184,500 in 2026, but experts say raising the cap or tax rate to 16.6% or higher may be necessary to address funding shortfalls.
- Delaying action could increase the required tax rate to 17.3% in eight years, and individuals may need to adjust their retirement plans accordingly.
- Since 1983, the share of wages subject to the payroll tax has decreased from about 90% to 83%, as more earnings exceed the taxable wage cap.
