What Eliminating the Social Security Tax Cap Would Mean for High Earners
Some lawmakers are calling for higher payroll taxes for certain workers to help save Social Security from insolvency.
Social Security needs more money, and some Congressional lawmakers want high earners to help provide it.
Sens. Elizabeth Warren, D-Mass., and Bernie Moreno, R-Ohio, are calling for the elimination of the Social Security payroll tax cap. The proposal would require people with higher wages to pay Social Security taxes on more of what they earn.
But changing the Social Security tax cap would be more complicated than simply asking high earners to pay more taxes. Key questions Congress would have to address include how to change the cap and whether additional taxes would increase Social Security benefits for high earners.
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And...the clock is ticking. Without major changes, the Social Security retirement and survivor trust fund is projected to run short of money as soon as 2032, according to the latest Social Security Trustees' report. That could result in an across-the-board 22% reduction in benefits. Here's more to know.
This article is part of a Kiplinger Tax series on the latest proposals to save Social Security. In case you missed it, see our first installment: What a New Flat-Rate Social Security COLA Would Mean for Retiree Taxes.
How the Social Security tax limit works
If you receive a regular paycheck, you’re likely familiar with the 6.2% Social Security tax that helps fund retirement and disability benefits for millions in the U.S., since it can shrink your take-home pay. (Self-employed workers also pay Social Security tax on their earnings.)
But you might not know that, depending on your income, the Social Security payroll tax doesn't necessarily apply to all of your wages. This is known as the Social Security tax cap or tax limit.
For 2026, Social Security taxes apply to the first $184,500 you earn.
- Employees pay 6.2% on those wages, while employers pay another 6.2%.
- Once your wages reach $184,500, you stop paying the Social Security portion of the payroll tax for the rest of the year.
So a worker earning $200,000 and a worker earning $1 million both pay Social Security taxes on $184,500 of wages. The worker earning $1 million doesn't pay the 6.2% Social Security tax on the remaining $815,500.
That tax limit also affects future benefits. The Social Security Administration uses your earnings history to calculate your Social Security benefit, but that calculation doesn't include earnings above the tax limit.
Essentially, the current Social Security payroll tax system caps both how much high earners pay into Social Security and how much those earnings can increase their future benefits.
The question now is: What would happen if Congress lifted that ceiling?
Proposal to eliminate the Social Security tax cap
Warren and Moreno want to eliminate the current tax limit, which would subject wages above $184,500 to the 6.2% employee Social Security tax if enacted at the current rate.
They say the change would ask the highest earners to contribute to Social Security at the same rate as other workers.
"This is a no-brainer: the wealthiest Americans, who have benefited the most from America's opportunities, should contribute the same percentage of their income as a factory worker in Chillicothe, Ohio, or a teacher in Worcester, Mass," Moreno stated in a release regarding the proposal.
- For a worker earning $1 million, that would make another $815,500 of wages subject to the Social Security tax.
- At the current 6.2% rate, that's about $50,561 more in Social Security taxes for the employee.
- The employer would generally owe another $50,561.
Warren and Moreno say the additional revenue could help protect Social Security benefits without raising the payroll tax rate for most workers (i.e., those whose wages remain below the taxable maximum).
"That one reform alone would impact about 6% of all households, the highest-earning Americans, and would protect Social Security benefits for at least two decades," Warren said in a Senate Finance Committee hearing in August.
Eliminating the Social Security tax limit would bring in substantial additional revenue, but how much it would improve the program's finances would depend in part on what happens to benefits for high earners.
For example, using its 2025 Trustees Report assumptions, the Social Security Administration modeled what would happen if the tax cap were removed. In one version, high earners would pay Social Security taxes on all of their wages but wouldn't receive extra SS benefits based on the additional taxes they paid. That would close about 67% of Social Security's long-term funding gap.
But what if those extra taxes also counted toward future benefits?
- High earners would get larger Social Security checks in retirement.
- That would mean more money coming into Social Security now, but also more money going back out later.
- Under that approach, the change would close about 48% of the long-term funding gap.
In other words, the more benefits high earners get from their extra taxes, the less the tax increase would help Social Security's finances.
- The Tax Policy Center estimates that taxing all wages for Social Security would bring in about $2.5 trillion over 10 years (2026 through 2036), affecting about 6% of U.S. households.
- The Tax Foundation estimates that the change could bring in about $3.2 trillion over roughly 10 years, from 2027 through 2036. But after factoring in possible economic changes, it estimates the gain would be closer to $1.5 trillion.
*The estimates use different assumptions about how people and businesses might respond to higher payroll taxes and whether high earners would get bigger Social Security benefits in return for paying more.
Either way, the analyses show that eliminating the tax cap could bring more money into Social Security. But such a measure wouldn't be enough to fix the program's long-term money problems on its own.
Impact on high earners?
For most workers, eliminating the Social Security tax cap wouldn't change their paychecks. The proposed change would affect workers who earn more than the 2026 tax limit of $184,500.
At the current 6.2% tax rate, here's what such a tax change might look like for high earners:
- $200,000 salary: About $961 more in Social Security taxes each year
- $500,000 salary: About $19,561 more each year
- $1 million salary: About $50,561 more each year
Employers also pay a 6.2% Social Security tax, so their payroll taxes would also increase on those additional wages.
Note: Such a change would apply to wages, not all income. For example, capital gains and dividends generally aren't subject to the Social Security payroll tax. So two people with the same total income could see different impacts depending on how they earn their money. Also, the above examples are for educational purposes only and are not based on existing law.
The proposal raises another important question: Would high earners get more Social Security benefits because they're paying taxes on more of their wages?
That matters because it could reduce how much the tax change helps Social Security. Giving high earners higher benefits would mean more money going back out of the program later.
The Social Security Administration estimates that eliminating the tax cap without giving high earners extra benefits would close about 67% of the program's projected long-term funding gap. If those newly taxed earnings also counted toward future benefits, the improvement would be about 48%.
Social Security solvency: Bottom line
For now, the Warren-Moreno approach remains a proposal. And while eliminating the taxable maximum isn't a novel idea, the latest push is noteworthy since Social Security's financial outlook is top of mind for many lawmakers, workers, and retirees.
Whether Congress takes this idea further, or pursues other proposals like a flat-rate Social Security cost-of-living adjustment (COLA), or adding a new tax on net investment income over $400,000 in addition to eliminating the Social Security tax cap remains to be seen.
In the meantime, the SSA is expected to announce the 2027 Social Security tax limit in mid-October. That number will determine how much of a worker's wages are subject to the 6.2% Social Security tax next year. Stay tuned.
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