Bipartisan Proposal Would Lift Social Security Tax Wage Cap 

Who said bipartisanship is dead? 

Senator Bernie Moreno, a pro-business Republican from Ohio known for his focus on border security and economic deregulation, and Senator Elizabeth Warren, a Democrat from Massachusetts who advocates for progressive economic and social policies, don’t agree on much. They’re in lockstep, however, in their belief that Congress must act now to fix Social Security’s shaky finances. To that end, the strange bedfellows have put forward a new proposal to lift the Social Security tax wage cap, set at $184,500 for 2026. Lifting the cap would mean income above that level would be taxed at the normal rate, raising significant additional revenues for the program while spreading the pain of higher taxes across more income earners. 

Having these two lawmakers, who have substantial political differences, come forward with a serious proposal for shoring up Social Security’s finances is a big deal, according to Kathleen Romig at the Center on Budget and Policy Priorities. “We haven’t seen a Republican officeholder put forward a serious plan to improve solvency since Sam Johnson did so in 2016,” she told Retirement Upside. “In that sense, it’s very encouraging to see this bipartisan proposal.” 

A Sensible Strategy

Rather than tackle the entire solvency problem in one go, Warren and Moreno have proposed taking a big first step by lifting the Social Security wage cap, which would roughly halve the long-term funding shortfall. They argue that a piecemeal approach, while not perfect, could encourage additional public conversation and genuine political debate about how to save Social Security from big benefit cuts. 

The proposal has no “donut hole,” noted Chuck Marr, vice president for federal tax policy at the CBPP, meaning it wouldn’t exempt earnings between the current cap and a new floor from Social Security taxes. Prior proposals have suggested capping at the standard limit and restarting the Social Security tax on any income above $400,000. 

“We’re not a fan of donut hole policies or the idea that only billionaires should be taxed to fix the program,” Marr said. “There’s certainly plenty of money from billionaires that should be raised, but you need to raise revenue more broadly than that.”

As Romig and Marr noted, there’s precedent and support for this approach: 

• In 1994, policymakers eliminated the Medicare tax wage cap, which was once set at the same level as Social Security’s.
• Polling routinely finds that removing or raising the earnings cap is the single most strongly favored policy option among Americans looking to shore up fund financing, per the National Institute on Retirement Security. 

Bipartisanship Is Key. For all intents and purposes, bipartisanship will be essential in any real Social Security funding solution. “Back in 1983, Republicans and Democrats held hands and jumped off the cliff together,” Romig said. “With the rules being what they are in the Senate, they’ll have to do so again.”