Retirement Social Security

Senators From Both Parties Have a Tax Plan That Could Save Social Security Recipients From Benefit Cuts

A proposal would raise taxes on higher earners and expand Social Security benefits while addressing a funding shortfall affecting current and future retirees.

By Chris Lewis, CEPF , Edited by Laura Hohenstein

Updated Nov. 5, 2026

Add Us On Google

If Social Security is part of your retirement plan, the big question is simple: how much of your check might be there when you need it?

Sen. Bernie Sanders (I-VT) introduced the Social Security Expansion Act in February 2025 alongside Sen. Elizabeth Warren and other Senate Democrats. It would apply Social Security payroll taxes to earnings above $250,000 and expand benefits. The proposal has not become law.

Here's what the proposal could mean for your paycheck now, how it will help you avoid money mistakes, what your future benefit may look like, and the longer fight over Social Security's finances.

Get a protection plan on all your appliances

Did you know if your air conditioner stops working, your homeowner’s insurance won’t cover it? Same with plumbing, electrical issues, appliances, and more.

A home warranty from Choice Home Warranty could pick up the slack where insurance falls short.

For a limited time, you can get your first month free with a Single Payment home warranty plan.

Get a free quote

The tax proposal

The plan centers on the payroll tax that funds Social Security. Under current law, workers and employers each pay 6.2% in Social Security payroll taxes up to an annual wage cap. In 2026, that taxable maximum is $184,500, and self-employed workers generally pay the combined 12.4% rate on covered earnings up to the cap.

The proposal would keep the current wage cap, but it would also apply Social Security payroll taxes to earnings above $250,000. That means wages between the regular cap and the new threshold would initially remain outside the tax, while earnings above the new threshold would be taxed again.

That structure is often called a "donut hole" because there is a gap between the regular wage cap and the new high-income threshold. The gap matters because the plan isn't written as a payroll tax increase on every worker.

The payroll tax change targets earnings above $250,000. Separately, the bill would increase the net investment income tax from 3.8% to 16.2%, direct the additional revenue to Social Security, and expand the business income subject to that tax.

Shopping for cheaper auto insurance? Enter your zip code here to get started.

Why it matters

The urgency comes from Social Security's projected funding gap. The 2026 trustees report, issued in June, projected that the Old-Age and Survivors Insurance Trust Fund, which pays retirement and survivor benefits, could run out of reserves in late 2032 if Congress doesn't act.

That doesn't mean Social Security would disappear. Payroll taxes would still come in. But once the retirement and survivor fund is depleted, incoming revenue would cover only about 78% of scheduled benefits, unless lawmakers change taxes, benefits, or both.

Without congressional action, reserve depletion would leave the program unable to pay full scheduled retirement and survivor benefits on time. The precise handling of payments after depletion remains unresolved.

Your paycheck now

For most workers, the first thing to watch is the threshold. If the new tax starts at $250,000, wages below that level would generally follow today's Social Security payroll tax rules.

If you earn above the threshold, you could owe additional Social Security payroll tax on the amount above it. Your employer could owe additional tax, too. If you're self-employed, the impact could feel larger because you generally cover both the worker and employer portions.

That doesn't automatically mean every high earner would pay the same amount more. The dollar impact would depend on your wages, business structure, and whether Congress adds phase-ins, exemptions, or other adjustments.

If you’re over 50, take advantage of massive discounts and financial resources

Over 50? Join AARP today— because if you’re not a member you could be missing out on huge perks. When you start your membership today, you can get discounts on things like travel, meal deliveries, eyeglasses, prescriptions that aren’t covered by insurance and more.

Start your membership by creating an account here and filling in all of the information (Do not skip this step!) Doing so will allow you to take up to 25% off your AARP membership, making it just $15 the first year with auto-renewal.

Your future check

The proposal is designed to protect scheduled benefits by improving Social Security's financing. If Congress adds revenue and uses it for Social Security, the program might be able to keep paying full scheduled benefits longer than it would under current projections.

The introduced bill includes an across-the-board benefit increase and would base annual cost-of-living adjustments on the Consumer Price Index for Elderly Consumers, or CPI-E. Those changes would require the bill to become law.

Under this proposal, earnings newly subject to Social Security payroll taxes above $250,000 would not generate additional benefit credit.

Retirees now

The introduced bill includes benefit increases for current beneficiaries as well as future recipients. However, it would need to become law before those changes could affect your check.

That distinction matters. A proposal isn't a law. Your benefit amount still follows existing Social Security rules, including annual cost-of-living adjustments and any deductions that apply to your specific situation.

The risk the proposal is trying to prevent is broader: insufficient funding to pay full scheduled retirement and survivor benefits after trust fund reserves are depleted. The trustees' projection shows that risk exists under current law, but it doesn't set a smaller check for you today.

The politics behind it

A payroll tax change is one of the clearest ways to raise money for Social Security, but it's also one of the hardest to pass. Any bill would need enough support in the House and Senate, plus a president willing to sign it.

That's the main uncertainty. Lawmakers might agree that Social Security has a funding problem, but they often disagree on whether the fix should come from higher taxes, slower benefit growth, a higher retirement age, general revenue, or some mix of changes.

This proposal plants a marker in the tax-hike camp. It says higher earners should help close the gap before future retirees absorb an automatic cut.

Retirement News: Almost 80% of Americans fear a retirement age increase — here’s the real reason why

What to watch next

Watch for committee action, revised bill text, or an updated actuarial analysis. Sponsors cite a 2023 Social Security Administration analysis of an earlier version that projected full scheduled benefits throughout its 75-year projection period, but that estimate used assumptions from the 2022 trustees report.

As introduced, the bill fixes the additional payroll tax threshold at $250,000 while allowing the regular wage cap to keep rising with average wages. The untaxed gap would eventually disappear when the regular cap reaches that threshold.

Bottom line

The proposal is a direct attempt to deal with Social Security's funding problem before automatic benefit cuts hit. It would likely ask higher earners to pay more payroll tax so the program has more money to keep scheduled benefits on track.

For now, don't overhaul your retirement plan around a bill that hasn't passed. Review your Social Security statement, know your claiming age options, and keep building other income sources where possible.

Congress still has choices. The sooner lawmakers act, the less abrupt the fix might need to be for your paycheck or your future check.

FAQs

Would claiming Social Security early protect me from future benefit cuts?

Claiming early would not guarantee protection from future changes. Any protections for existing beneficiaries would depend on the legislation Congress passes. Under current rules, claiming before full retirement age also reduces your monthly retirement benefit, so funding concerns alone shouldn't drive your decision.

How would the proposal help workers with low lifetime earnings?

The bill would strengthen Social Security's special minimum benefit for qualifying workers with long careers and low earnings. Sponsors say the benefit would reach 125% of the federal poverty level for a full-career worker. This would not create a universal minimum payment for everyone receiving Social Security.

Could the proposal help children receiving survivor benefits?

Yes. The bill would restore benefits for qualifying full-time college or vocational students up to age 22 if a parent has died or has a qualifying disability. This provision would expand support for families beyond the bill's retirement benefit increases.

More from FinanceBuzz: