Former Social Security Commissioner Just Backed a Plan That Could Prevent a Benefit Cut

More policymakers are supporting the call to eliminate the Social Security payroll tax cap in an effort to keep the program solvent and prevent the reduction of Social Security benefits for seniors. Last week, Iowa Democrats Josh Turek and Lindsay James joined the effort during a campaign event, which was also attended by former Social Security Administration Commissioner Martin O'Malley.

Social Security was a prominent topic during the event, and for good reason: As the program approaches insolvency and the depletion of its Old-Age and Survivors Insurance (OASI) trust fund, the potential for an across-the-board benefits reduction is putting extra pressure on Congress to act. According to many policymakers, eliminating the payroll tax cap could be a step in the right direction.

The reasoning for eliminating the Social Security payroll tax cap

During the campaign event, Turek recommended eliminating the payroll tax cap, arguing that doing so might be an important step in preserving the program's finances. In 2026, the Social Security tax cap is set at $184,500, meaning an individual's income beyond that cap isn't taxed for the program.

"I really believe that one of the best ways to keep Social Security solvent is we have to remove the cap," said Turek. "I think that it is absolutely ridiculous that individuals like Bill Gates and Elon Musk and Jeff Bezos pay Social Security tax for the first few minutes of the year, but we have teachers and police officers and nurses that are paying year-round."

How removing the tax cap might work

If the tax cap were removed, then high-earners would pay more into the Social Security program in taxes. Rather than paying taxes on just a portion of their income, high earners would pay taxes on their entire income, just as lower earners do.

The change could increase the Social Security program's revenue. For example, in 2026, an individual earning $1 million would only pay the 6.2% payroll tax on the first $184,500 they earned. That amounts to taxes of $11,439.

But if the tax cap were removed, that same individual would pay taxes on their entire $1 million income, amounting to $62,000.

Individuals earning up to $184,500 per year would be unaffected by the change as long as the 6.2% tax rate remained the same.

How the change fits into the Democratic focus

The proposal is supported by many Democrats and progressive Social Security advocates, who argue that requiring higher earners to pay Social Security taxes on more of their income would improve the program's finances.

James indicated that she backs eliminating the payroll tax cap, and she also supports expanding benefits access and adjusting the cost-of-living increases to better reflect the specific expenses that seniors often face. O'Malley has also backed increasing the payroll tax cap for high earners, arguing that doing so could help address Social Security's financial problems.

The importance of Social Security

O'Malley emphasized the importance of the Social Security program and argued that the program may be a major issue in the upcoming election.

O'Malley emphasized that many older Americans rely heavily on Social Security income to remain financially independent, rather than falling into poverty. Additionally, the program supports families and children with survivors and disability benefits.

How DOGE staffing reductions fit into the picture

O'Malley criticized staffing reductions at the Social Security Administration under the Trump administration and attributed them to policies associated with DOGE and Elon Musk. According to O'Malley, those staffing reductions have resulted in degraded field office and phone customer support.

He added that in three months, the SSA's staffing was reduced to a 63-year low. Staffing limitations also resulted in the formation of "ghost offices," local SSA offices that are so understaffed they are unable to effectively serve customers.

The Republican rebuttal to the accusations

Republican Representative Ashley Hinson's campaign has pushed back against the Democrats' statements. Her campaign emphasized the fact that the 2025 budget bill included efforts like tax relief for seniors.

The campaign also stated that the legislation that Hinson reported would have reduced SSA staffing by 4%, but had no impact on benefits or forced field office staffing cuts.

The root of the proposed payroll tax cap elimination

The impending insolvency of the Social Security OASI trust fund is at the root of the proposed tax cap elimination. According to the Social Security Trustees' 2026 annual report, the OASI trust fund may become insolvent by the fourth quarter of 2032, which is one quarter earlier than the 2025 report projected.

If Congress does not change the law before the OASI reserves are depleted, the Trustees project that incoming revenues would cover about 78% of scheduled benefits, implying an eventual shortfall of roughly 22%

The argument around the payroll tax cap elimination centers around who pays how much into Social Security, not who receives benefits.

Bottom line

Congress is under pressure to identify and implement a solution before the trust fund becomes insolvent and benefits are reduced. Though legislators are proposing various potential solutions, Congress has not yet backed one or a combination of solutions.

As the November midterms sharpen the fight over Social Security, watch to see what solutions candidates are proposing and who those solutions might affect.

Hopefully benefits aren't cut, but it may be a good idea to stress-test your retirement plan to see how you might live if you were to receive a reduced monthly Social Security payment.

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