For years, the Social Security shortfall has been disclosed. Despite offered solutions, Congress has yet to execute them due to opposition from other sides.
The program has been in deficit since 2021, and trust funds responsible for paying Social Security payouts may become bankrupt by 2035. Although this would not cease the payment of benefits, it would significantly lower scheduled benefit payments, implying that benefits might be reduced by at least 17% within a decade.
However, there is still time to make the required reforms, and if voters are to be believed, several proposals have the potential to benefit both sides of the aisle. A recent poll by the University of Maryland’s Program for Public Consultation (PPC) found that implementing several universally approved positions could help fill the difference.
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Make income over $400,000 subject to Social Security’s payroll tax
Social Security is primarily funded through payroll taxes, with both employees and employers contributing 6.2% of wages up to an annual ceiling ($168,600 in 2024, increasing to $172,000 in 2025). The program’s limited scalability led to a decision to exempt income beyond a certain threshold from Social Security taxes.
To make payments more equitable, a proposal has been made to extend the payroll tax to earnings above $400,000, as people with the lowest incomes currently have the highest tax burden. If approved, the idea may cover 60% of the program’s funding shortfall. The University of Maryland’s PPC survey found strong bipartisan support for this plan, with 89% of Democrats and 87% of Republicans in favor. This does not imply that the policy will be implemented, but it may be a good start.[
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Raise the Social Security payroll tax rate to 6.5% over six years
Another idea comprises a 6.2% payroll tax for both employees and businesses, resulting in a combined rate of 12.4%. Raising this rate gradually to 6.5% over six years would close 15% of the program’s financial gap. According to the University of Maryland’s PPC, this idea gets 87% support from both major political parties. Individual impacts would be small, but the long-term collective benefit could be enormous.
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Gradually raise full retirement age to 68 by 2033
Workers can start receiving Social Security retirement benefits at age 62, but must wait until they reach full retirement age (FRA) to receive their full primary insurance amount (PIA).For people born in 1960 or after, the FRA is 67, and claiming benefits early leads to a lower payout. Raising FRA to 68 by 2033 would close 15% of the program’s financial gap, with support from 88% of Democrats and 91% of Republicans, according to the University of Maryland’s PPC.
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Reduce benefits for workers with income in the top 20%
Social Security benefits are computed by dividing a worker’s lifetime income into two bend points and applying different percentages to each share. The method now distributes 90% of revenue below the first bend point, 32% between the first and second bend points, and 15% above the second bend point. Reducing the highest percentage to 5% for the top 20% of earners might close 11% of the program’s financing gap. According to the University of Maryland’s Public Policy Center, 93% of Democrats and 92% of Republicans approve this plan.