Social Security is a touchy subject for policymakers, but senators elected in 2026 will come face to face with it. Most would rather avoid the looming fiscal crisis. One solution gaining traction is to raise taxes without dealing with the federal overspending problem. A tax increase hurts workers, even if it doesn’t come directly out of their paychecks.
More solutions have surfaced to Social Security’s fiscal cliff in the last few years because of the threat of insolvency. The Old Age and Survivors Insurance Trust Fund is projected to become depleted in the fourth quarter of 2032. At that point, benefits will be cut by 22 percent, as there will only be sufficient funds to cover 78 percent of scheduled benefits. In 2025 alone, the Old Age and Survivors Insurance and Disability Insurance program cost $160 billion more than it collected, depleting reserves to cover the shortfall.
While 2032 may sound far off, the U.S. senators elected in this midterm cycle will be in office on that projected date. Two unlikely senators are working together to propose a solution to Social Security’s insolvency. Ohio Republican Bernie Moreno and Massachusetts Democrat Elizabeth Warren have proposed lifting the Social Security payroll tax cap. Currently, the amount of annual earnings subject to Social Security tax is $184,500. All wages up to that amount are taxed at 12.4 percent, split equally between workers and their employers. If you are self-employed, you pay the entire 12.4 percent yourself on wages up to the cap.
The Social Security Trustees analyzed the effects of eliminating the payroll tax cap and estimated that it would raise an additional $3.4 trillion over 10 years. This would theoretically close almost half of the funding gap over 75 years—but still not enough to solve the long-term problem.
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The problem with eliminating the payroll tax cap is that it places a much larger burden on small business owners and the self-employed. Because they must pay both the employee and the employer side of payroll taxes, business owners and freelancers are subject to a higher tax simply because they chose non-traditional employment.
The senators proposing to eliminate the payroll tax cap paint those affected as wealthy corporate lawyers, but this skews reality. Hard-working Americans finding unique ways to support their families and supplement their incomes will be affected. Middle-class W-2 earners with a successful side business would surpass the cap. When the few thousand extra dollars a mom makes from grocery deliveries or selling handcrafted items on Etsy are suddenly taxed higher, her hard work is penalized, discouraging her efforts and making priorities like saving for her child's future no longer worth it.
Instead of penalizing success and discouraging self-employment, policymakers need to reform Social Security so it works as intended. Upon signing the Social Security Act in 1935, President Roosevelt said, “We have tried to frame a law which will give some measure of protection to the average citizen and his family against the loss of a job and against poverty-ridden old age.”
Social Security was not designed to be the sole income for every American who made it to retirement age. The funds are not sufficient to continue funding 70 million people through 20 years of retirement. Instead, Social Security solutions must take the program back to its intended purpose, and workers must be able to save for their own future.
Personal savings accounts and lowering tax burdens are essential to retirement. A great majority of nonretired Americans with savings plans indicate they will have enough to live comfortably in retirement compared to those who haven’t saved for the future.
New efforts under the Trump administration are encouraging Americans to take retirement into their own hands by making personal retirement savings more accessible. Children now have access to long-term investments via Trump Accounts, which can yield $243,000 at retirement. Also, rules are being considered to allow working-class Americans access to private equity. In 2027, the federal Saver’s Match will be available to lower-and middle-income workers who save for their retirement in individual retirement accounts.
Women live longer than men, but typically take more time off work to look after family members. Policymakers should consider allowing those who took at least one year out of the workforce to start making catch-up contributions before the age of 50.
Vulnerable populations should rely on Social Security as a lifeline, but Americans should be able to save their own income and invest it for maximum growth during their working years. Increasing taxes on freelancers and small business owners will discourage hard work and deter wise personal saving and investing, only to feed an unsustainable program that can never be satisfied.
Kamryn Crane is a budget and entitlement reform policy analyst at Independent Women.
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