Eliminating the funding shortfall in Social Security solely by raising payroll taxes could cost the typical U.S. worker and their employer thousands of dollars — a “financially impossible” burden for many Americans, according to an economist with the Cato Institute.
Payroll taxes are the primary funding source for Social Security, although the program now pays out more in benefits than it collects through those taxes due to America’s growing number of retirees. Because of the shortfall in tax revenue, the program is drawing on its retirement trust fund to cover the gap.
Risk of benefit cut
Unless Congress acts, the Social Security trust fund is projected to run out in 2032, when benefits could be cut by about 22%.
To cover the shortfall, the payroll tax could be increased from 12.4% to 17%, according to Cato—a nonpartisan think tank focused on limited government and free markets. Cato notes that raising the tax to this rate would restore the fund and guarantee full Social Security payouts for the long term.
Employees and employers typically split the payroll tax down the middle, whereas self-employed individuals cover the entire rate themselves. First established at 2% when Social Security debuted in 1937, the tax rate has incrementally increased over time.
According to Cato’s estimates, boosting the rate to 17% would cost an average worker making around $62,000 per year an extra $2,600 to $3,000 annually, divided between the employee and employer. Consequently, many staff members would find it difficult to manage the higher tax burden, noted Romina Boccia, Cato’s director of budget and entitlement policy, in an interview with CBS News.
She pointed out that many of these workers lack even $400 in savings for unexpected expenses. Because absorbing that extra financial burden is unrealistic for most employees, lawmakers will have to explore alternative solutions.
Boccia noted that increasing or lifting the cap on payroll taxes is growing in popularity partly because people find the concept of shifting the financial burden onto others appealing.
According to a 2025 Bipartisan Policy Center survey of over 4,000 Americans, raising or eliminating the cap received support from 65% of Democrats and 62% of Republicans. The study also revealed that most households making over $200,000 annually favored the proposal.
Boccia warned that lifting or raising the cap could lead to unforeseen side-effects, including pushing peak marginal tax rates for wealthy households beyond 60% in a number of states. In turn, this elevated tax burden might drive some high-wage earners to opt for early retirement instead, she explained.
Rather than taking that path, Boccia argues that broader structural changes are necessary to secure Social Security’s future, pointing out that the system was established nearly a century ago—long before modern retirement tools like 401(k)s, target-date funds, and automatic enrollment existed. Yet, even with these advances available, millions of Americans still reach retirement with minimal or no savings.
She emphasized that solutions must lean far more heavily on trimming benefits, explaining that the core reason behind the deficit is the continuous growth in benefit payouts over time.
Should high earners get less?
To be fair, top-earning individuals receive higher monthly checks than lower earners, with maximum payouts for 2026 retirees reaching $5,181 per month—or over $62,000 annually. Beneficiaries who qualify for this upper limit are generally those whose income regularly approached or exceeded the contribution threshold.
Boccia remarked that a high-income couple can draw around $120,000 per year from Social Security, an amount she considers disproportionately high compared to what public pension systems offer in most other countries.
Boccia suggested that another approach would be tying the retirement age to average life expectancy, which has increased for Americans in recent decades. Simply put, as people live longer, they should also remain in the workforce longer.
However, implementing that policy could face strong political opposition, as the typical U.S. retirement age is 62, according to the Transamerica Center for Retirement Studies. The organization’s research also highlights that most individuals end up retiring earlier than planned—not voluntarily, but due to job losses, health struggles, or other unexpected complications.
Boccia favors a standardized, uniform benefit, providing a predictable payout that workers could easily anticipate and build upon with personal savings. She notes that Social Security’s current complexity can deter future planning, as many employees remain uncertain about what their actual retirement income will be.
She noted that the existing calculation is so complicated that average workers cannot anticipate their future benefits, making effective financial planning nearly impossible.