On June 24, the Senate Finance Committee’s Subcommittee on Social Security held a hearing on ways to solve the looming shortfall in funding for Social Security benefits. While most Republicans expressed opposition to raising the wage cap, there were some who joined with Democrats in supporting the idea.

The Social Security trust fund has been projected to run short of money to pay full benefits to beneficiaries in six years. Congress is reacting to that projection by examining a variety of ways to shore up the trust fund’s financing. One such idea is raising the wage base. The current wage base is $184,500. There is legislation pending, introduced by Sen. Bernie Sanders (I-VT), the subcommittee’s ranking member, that would subject compensation above $250,000 to FICA/SECA taxes. That idea was discussed extensively at the June 24 hearing.

Most Democrats support the proposal and some even support eliminating the wage base altogether. In fact, House Ways and Means Committee ranking member and likely chair if Democrats gain control of the House after the November elections, Rep. Richard Neal (D-MA), said he would pursue legislation to raise the wage base should Democrats control the House next year. And at least one Republican Senator, Sen. Bernie Moreno (R-OH), has expressed support for adjusting the wage base to get more contributions from wealthier taxpayers. However, most Republicans appear to oppose the idea.

The National Federation of Independent Business (NFIB) testified at the hearing in opposition to the idea of raising the wage base. NFIB said it would harm small businesses, especially pass-through businesses. The Sanders proposal, the Social Security Expansion Act, and others like it “represent not just a tax increase on the wealthy,” NFIB said, “but on the revenue that small business owner depend on to operate, grow, and expand their small businesses.”

Sen. Chuck Grassley (R-IA) agreed and added that Republicans are opposed to “punitive tax hikes.” He also said that “curbing benefits should not apply to Americans in or near retirement, and that any changes must prevent senior poverty “as well or better than under current law.”

Witnesses at the hearing also pointed out that even eliminating the wage base would not generate enough revenue to restore Social Security to solvency. A mixture of other ideas is necessary, witnesses said.

“A durable solution requires both sides to share the risk,” testified the Bipartisan Policy Center (BPC). The BPC called for a measure to bridge the gap, including temporary borrowing authority or a limited general revenue transfer. Some stakeholders have also suggested trimming Social Security benefits for future retirees, especially those at the upper end of the income level.

Prospects: With six years to go before the Social Security trust funds will be unable to pay full benefits, it is unlikely Congress this year will make the painful decisions required to shore up the program’s financing. But concerns about the program’s solvency are growing, and with Democrats believing that they may regain control of the House and/or Senate next year, these tax increase ideas could gain traction. Social Security is an issue now, albeit one unlikely to win bipartisan consensus any time soon. And it likely will remain an ever-more pressing issue next year and in the years following.

NAIFA Staff Contacts: Mike Hedge – Senior Director – Government Relations, at mhedge@naifa.org, or Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org