Raising the Social Security tax cap would apply the 6.2% payroll tax to earnings that currently escape it, and depending on how a bill is written, it could close anywhere from about a fifth to two-thirds of Social Security’s 75-year funding shortfall. In 2026, only the first $184,500 of a worker’s wages is subject to Social Security tax; every dollar above that is exempt.1Social Security Administration. Contribution and Benefit Base Because top-end wages have grown faster than average wages for four decades, a shrinking share of national earnings now flows into the trust fund, and several bills in Congress would either lift the ceiling or eliminate it. The revenue those proposals would generate — and what they would mean for future benefits — turns on design choices that are easy to miss.
The Cap Today
The Social Security tax applies to earned income up to an annual ceiling called the contribution and benefit base, set at $184,500 for 2026. Employees pay 6.2% on wages up to that amount, and employers match it.2Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax A worker who hits the cap pays $11,439 for the year, with the employer paying the same. Self-employed workers owe the combined 12.4% on net self-employment income up to the same $184,500.3Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax
Once year-to-date wages cross the threshold, Social Security withholding stops for the rest of the calendar year. Medicare tax works differently and applies to all earnings with no ceiling.4Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates Roughly 6% of workers earn above the cap in any given year, but they account for a disproportionate share of total wages.
Why the Cap Is Under Pressure
When Congress last overhauled Social Security financing in 1983, the cap was set to capture about 90% of all covered wages nationwide. Since then, earnings at the top have grown much faster than the average wage that the cap is indexed to. By recent estimates, the taxable maximum now covers closer to 80–83% of total covered earnings, meaning a growing share of national wage income falls outside the payroll tax entirely.5Social Security Administration. The Evolution of Social Security’s Taxable Maximum
That drift matters because the trust funds are running short. The 2025 Trustees Report projects an unfunded obligation of roughly $22.6 trillion over 75 years, equal to 3.57% of taxable payroll.6Social Security Administration. The 2025 Annual Report of the Board of Trustees The Old-Age and Survivors Insurance Trust Fund is projected to be depleted by 2033, at which point incoming payroll taxes would cover about 77% of scheduled benefits. Combined with the Disability Insurance fund, reserves last until 2034, with 81% of benefits payable after that.7Social Security Administration. A Summary of the 2025 Annual Reports Social Security is pay-as-you-go, so it doesn’t shut off at depletion, but current law would then force an automatic benefit cut to match available revenue.8Social Security Administration. What Is FICA
What Raising the Cap Would Do to the Shortfall
The Social Security Administration’s Office of the Chief Actuary has modeled dozens of variations. Two design decisions drive most of the difference in results: how high the cap goes, and whether workers who pay more also get credited with higher benefits.
- Eliminating the cap entirely without granting benefit credit for the newly taxed earnings closes about 67% of the 75-year shortfall.
- Eliminating the cap with proportional benefit credit closes about 48%.
- Taxing earnings above $250,000 (with a “donut hole” between the current cap and $250,000) and giving no benefit credit closes about 65%.
- Raising the cap enough to cover 90% of national earnings — the 1983 target — closes only about 22%, because higher-earning workers would also earn higher benefits.
Those figures come from SSA’s actuarial provisions database.9Social Security Administration. Provisions Affecting Payroll Taxes None of the options alone closes the full gap, which is why most reform bills pair cap changes with adjustments to benefits or the cost-of-living formula.
The near-term revenue picture from the Congressional Budget Office is consistent. Raising the taxable share to 90% of earnings would reduce the federal deficit by roughly $72 billion in 2026. Taxing all earnings above $250,000 with a donut hole would reduce it by about $122 billion that year.10Congressional Budget Office. Increase the Maximum Taxable Earnings That Are Subject to Social Security Payroll Taxes
The Benefit-Credit Question
Social Security benefits are calculated from a worker’s Average Indexed Monthly Earnings, which counts only wages that were actually taxed. The formula applies three percentages to slices of that average:
- 90% of the first $1,286 in average indexed monthly earnings
- 32% of earnings between $1,286 and $7,749
- 15% of earnings above $7,749
Those dollar thresholds, called bend points, are the 2026 figures and adjust with average wages each year; the percentages are fixed in statute.11Social Security Administration. Primary Insurance Amount The steep progressivity is why lower earners replace a much larger share of pre-retirement income than higher earners.
Under current law, earnings above the cap are neither taxed nor counted toward benefits. If Congress raises the cap and feeds the new earnings into the same formula, maximum benefits would rise, and the revenue gain would be partially offset by higher future payouts. That is the entire reason eliminating the cap with benefit credit closes 48% of the shortfall while eliminating it without benefit credit closes 67%. Proposals that meaningfully extend solvency generally either exclude the extra earnings from the benefit formula or run them through a separate, much less generous calculation.
For context, a worker retiring at full retirement age in 2026 who earned at or above the taxable maximum throughout their career can receive up to $4,152 per month.12Social Security Administration. What Is the Maximum Social Security Retirement Benefit Payable? Whether cap changes push that number higher depends entirely on the benefit-credit choice.
Bills in Congress
Social Security 2100 Act
Introduced in the 118th Congress as H.R. 4583, this bill would leave the existing taxable maximum in place and impose the 6.2% Social Security tax on earnings above $400,000.13United States Congress. H.R. 4583 – Social Security 2100 Act Earnings between the current cap and $400,000 would sit in an untaxed donut hole. Because the regular cap keeps rising with average wages while the $400,000 threshold stays fixed, the donut hole eventually closes and all earnings become taxable. The bill has not been reintroduced in the 119th Congress as of mid-2026.
Social Security Expansion Act
Reintroduced in the 119th Congress as S. 770, this bill applies the Social Security payroll tax to all earnings above $250,000, again with a donut hole below that threshold that shrinks over time.14United States Congress. S.770 – Social Security Expansion Act The bill also raises benefits: the first bend-point factor moves from 90% to 95%, everyone becoming eligible after 2025 gets an 18% across-the-board increase, a minimum benefit is set to the federal poverty level, and cost-of-living adjustments switch to the Consumer Price Index for Elderly Consumers. It would also raise the net investment income tax rate from 3.8% to 16.2% and route that revenue to Social Security.
The Arguments on Each Side
The case for raising the cap starts with the 90% target from 1983. Supporters say the cap has drifted so far from the share of wages it was meant to cover that the trust fund is being starved by nothing more than the pattern of top-end wage growth, and that restoring the historical reach of the tax would close much of the shortfall without changing anyone’s benefits.
Opponents argue that Social Security was built as social insurance with a proportional link between contributions and benefits. Taxing much higher earnings without crediting them toward benefits, in that view, converts the program from earned insurance into something closer to a general tax on high incomes. The SSA’s own numbers make the trade-off concrete: the same policy closes 67% of the shortfall without benefit credit, or 48% with it, and the political weight of that gap is what most reform debates end up circling.