Zach Wahls's Plan to Raise Social Security Benefits and Payroll Taxes

Zach Wahls, an Iowa state senator and Social Security advocate, has proposed raising Social Security benefits across the board while increasing the payroll tax that funds the program. His plan would lift the cap on earnings subject to Social Security tax — currently set at $168,600 for 2024, though this amount changes yearly — so that higher earners pay tax on all their income rather than only income below the cap. The additional revenue would fund benefit increases for all recipients, not just those with lower incomes.

Wahls frames this as a way to address Social Security's long-term funding gap without cutting benefits or raising the full payroll tax rate uniformly across all earners. The plan assumes that removing or raising the earnings cap would generate enough revenue to sustain higher benefit payments for current and future retirees.

Key Takeaways

  • Wahls's proposal would remove or significantly raise the earnings cap on Social Security payroll taxes, meaning high earners would pay tax on income above the current threshold.
  • The plan would use the additional tax revenue to increase benefits for all Social Security recipients, not means-test benefits based on income.
  • This approach differs from other reform proposals that cut benefits, raise the payroll tax rate for all workers, or increase the full retirement age.
  • The plan has not been enacted into law and remains one of several competing proposals for addressing Social Security's projected shortfall.

How the Earnings Cap Currently Works

Social Security payroll tax applies to wages and self-employment income up to an annual cap. In 2024, that cap is $168,600; in 2025, it rises to $176,100. The cap increases each year based on the national average wage index. Once a worker's income exceeds the cap in a given year, no additional Social Security tax is withheld from their paychecks for the rest of that year.

This means a worker earning $200,000 pays the same total Social Security tax as a worker earning $176,100 (in 2025). The cap applies to both the employee's share (6.2 percent) and the employer's share (6.2 percent) of the payroll tax. Self-employed individuals pay both shares themselves.

What Removing the Cap Would Change

If the earnings cap were removed entirely, high earners would pay Social Security tax on all their income with no upper limit. A person earning $500,000 would pay the 6.2 percent tax on the full amount, not just on income up to the cap. This would increase the total payroll tax collected by the program each year.

Removing the cap would affect roughly the top 6 percent of earners, according to Social Security Administration data. The exact revenue gain depends on wage growth and how many people earn above the cap in any given year. Wahls's proposal assumes this additional revenue would be sufficient to fund higher benefits without requiring other changes to the program.

How Benefit Increases Would Work Under This Plan

Wahls's plan proposes raising benefits for all Social Security recipients, not targeting increases to lower-income retirees. This differs from means-tested approaches that would reduce benefits for higher-income recipients. Under a universal increase, someone receiving $1,500 per month would see their benefit rise by the same dollar amount or percentage as someone receiving $800 per month, depending on how the increase is structured.

The exact size of the benefit increase would depend on how much revenue the cap removal generates and how the additional funds are distributed. Wahls has not published detailed calculations showing what the monthly increase would be for different benefit levels.

How This Plan Compares to Other Social Security Reform Proposals

Several competing approaches to Social Security reform exist. Some proposals would raise the payroll tax rate for all workers from 12.4 percent to a higher percentage. Others would gradually increase the full retirement age beyond its current trajectory. Still others would means-test benefits, reducing payments for higher-income retirees. Some combine multiple changes.

Wahls's approach focuses on the revenue side by taxing higher earners more, rather than cutting benefits or raising taxes on all workers uniformly. It avoids means-testing, which would treat Social Security more like a welfare program than an earned benefit. However, it places the entire burden of additional funding on high earners and does not address other long-term pressures on the program, such as increasing life expectancy.

Current Status of the Proposal

Wahls's plan remains a proposal rather than enacted policy. It has been discussed in state-level politics and among Social Security reform advocates but has not been passed into federal law. Social Security is a federal program, so any change to the earnings cap or benefit structure would require action by Congress, not state legislatures.

Multiple reform proposals circulate in Congress at any given time, and none has achieved broad bipartisan consensus. The Social Security Trust Fund is projected to be depleted around 2034, after which incoming payroll taxes would cover only about 80 percent of scheduled benefits unless Congress acts. This timeline creates ongoing pressure for reform, but the shape that reform takes remains uncertain.

Frequently Asked Questions

Would removing the earnings cap affect my Social Security benefits?

Removing the cap would not directly change your benefit calculation if you currently earn below the cap. However, if the additional revenue from higher earners funded a universal benefit increase, your monthly payment could rise. The exact impact depends on how Congress structures any benefit increase.

How much would high earners pay if the cap were removed?

A person earning $500,000 would pay 6.2 percent Social Security tax on the full amount instead of only on income up to the cap. In 2025, that would mean paying tax on an additional $323,900 in income. The total additional tax would be roughly $20,082 per year for that individual.

Is removing the earnings cap the same as raising the payroll tax rate?

No. Raising the payroll tax rate means increasing the percentage (currently 6.2 percent for employees) that all workers pay on all their income. Removing the cap means keeping the rate the same but explore it to income above the current threshold. The two approaches generate revenue differently and affect different groups of workers.

Could removing the earnings cap alone solve Social Security's funding problem?

Removing the cap would extend the Trust Fund's solvency but likely would not solve the entire funding gap on its own, depending on how benefits are adjusted. The Social Security Administration has published analyses showing that various combinations of changes — including cap removal, tax increases, and benefit adjustments — could achieve long-term solvency.