A rival plan to save Social Security would tax every dollar earned above $250,000 – closing most of the shortfall without cutting a single check
Social Security’s clock is ticking. The program’s combined trust funds are on track to run dry by 2035, according to the 2024 Trustees Report, the most recent available projection as of mid-2026. If Congress does nothing before that date, every one of the program’s roughly 68 million beneficiaries would face an automatic benefit cut of about 17 percent under that report’s intermediate assumptions. Against that backdrop, a bill now before the 119th Congress offers a straightforward, if politically contentious, fix: make high earners pay Social Security taxes on a much larger share of their income.
The legislation is H.R. 1700, the Social Security Expansion Act, introduced by Rep. Jan Schakowsky (D-IL). Its core mechanism is simple. Right now, a physician earning $400,000 stops paying Social Security taxes after the first $176,100 of income. Under H.R. 1700, that same doctor would owe the full 12.4 percent payroll tax on every dollar above $250,000, adding roughly $18,600 a year to the tab. Federal actuaries project the change would close the majority of Social Security’s 75-year funding gap without reducing a single benefit check.
How the “donut hole” works
Under current law, workers and employers each pay 6.2 percent of wages into Social Security, for a combined 12.4 percent, but only on earnings up to the taxable maximum. In 2025, that cap sits at $176,100. Every dollar above it is exempt. The cap has existed in some form since the program’s creation in 1935, and it means someone earning $5 million a year pays the same Social Security tax as someone earning $176,100.
H.R. 1700 would leave the existing cap in place but restart the 12.4 percent tax on all earnings above $250,000. The gap between the current cap and $250,000, roughly $74,000 in today’s terms, would remain untaxed. That exempt band is what policy analysts call the “donut hole,” borrowing the term from a similar gap that once existed in Medicare prescription drug coverage.
For workers earning below $176,100, nothing changes. For those earning between the cap and $250,000, nothing changes either. The new tax kicks in only on income above the $250,000 line, and it applies to wages and self-employment income alike.
Over time, the donut hole would shrink and eventually disappear. The taxable maximum is adjusted upward each year to track average wage growth. Once it climbs past $250,000, which actuaries expect to happen within roughly two decades under intermediate assumptions, all covered earnings would be subject to Social Security tax from the first dollar to the last.
What the actuaries project
The Social Security Administration’s Office of the Chief Actuary has modeled a closely aligned policy option. Provision E2.16, drawn from the agency’s menu of solvency options using the 2024 Trustees Report’s intermediate assumptions, would levy the 12.4 percent tax on earnings above $250,000 in addition to current-law taxes below the cap.
The agency’s deficit-reduction charts show the option would eliminate a large share of the projected 75-year shortfall, measured as a percentage of taxable payroll. Analyses from the Congressional Budget Office and policy organizations such as the Committee for a Responsible Federal Budget have placed the figure at roughly 70 to 80 percent of the gap, though the exact number shifts with economic and demographic assumptions. That would substantially extend trust fund solvency, potentially pushing the depletion date well past mid-century, but it would not, on its own, guarantee permanent solvency without additional adjustments.
Roughly 5 to 6 percent of W-2 wage earners reported annual compensation above $250,000 in recent filing years, based on Social Security Administration wage statistics that cover workers with taxable earnings. That relatively small share of the workforce would shoulder the entire cost of the proposal.
How it compares to earlier proposals
H.R. 1700 is not the first attempt to lift the payroll tax cap. In the 118th Congress, Rep. John Larson (D-CT) introduced H.R. 4583, the Social Security 2100 Act, which set its restart point at $400,000 rather than $250,000. That higher threshold would have shielded a larger band of upper-middle-income wages, concentrating the new revenue more heavily on the very highest earners but raising less total money. Larson’s bill never received a committee vote.
By dropping the threshold to $250,000, H.R. 1700 pulls in a broader group: physicians, law firm partners, senior engineers in high-cost metro areas, and mid-level executives whose salaries cross the line. The lower threshold raises more revenue but also generates more political friction, because it reaches earners who may not consider themselves wealthy, particularly in cities like San Francisco, New York, and Boston where the cost of living absorbs a large share of a $250,000 salary.
One design difference matters for public perception. Under H.R. 1700, high earners who pay the additional tax would not receive proportionally higher benefits in return. That breaks the traditional link between contributions and benefits that has defined Social Security since its inception, a shift that supporters frame as progressive and opponents call a step toward turning the program into a wealth transfer.
The tax burden question no one has fully answered
Several significant questions hang over the proposal as of June 2026. The Social Security Administration has not released detailed distributional tables isolating how much additional tax would be paid by earners between $250,000 and $400,000 under H.R. 1700 relative to current law. Without that granular breakdown, analysts must infer distributional effects from aggregate data, leaving uncertainty about how the burden would fall across occupations, regions, and family structures.
The bill’s interaction with other taxes is where the math gets uncomfortable. High earners above $250,000 already face the 0.9 percent Additional Medicare Tax enacted under the Affordable Care Act, plus federal and state income taxes that push combined marginal rates above 50 percent in states like California and New York. Layering a restored 12.4 percent Social Security tax on top could push effective marginal rates on labor income into territory that tax economists at institutions like the Tax Foundation and the American Enterprise Institute have warned may discourage work, shift compensation toward non-wage forms such as stock options and deferred pay, or accelerate the use of S-corporation structures to reclassify wages as business income. None of these behavioral responses are fully captured in the Chief Actuary’s static scoring, which assumes taxpayers do not change their behavior in response to higher rates.
There is also an open design question that lawmakers have not fully debated: should the donut hole be permanent, preserving some untaxed band of upper-middle income indefinitely, or should it be allowed to phase out as the taxable maximum rises? The answer has implications for how tightly benefits remain linked to contributions at the top of the earnings scale and for whether the public continues to view Social Security as an earned-benefit program or as a redistributive tax.
Where the politics stand as H.R. 1700 awaits a hearing
H.R. 1700 has drawn co-sponsors exclusively from Democratic members of the House as of early June 2026. No companion bill has advanced in the Senate, and Republican leadership has signaled opposition to payroll tax increases, favoring instead a combination of benefit adjustments, changes to the retirement age, and economic growth assumptions to address the shortfall. The bill has not received a committee hearing.
That political reality means the proposal functions less as imminent legislation and more as a marker in the broader debate over Social Security’s future. It establishes one end of the negotiating spectrum: solve the problem entirely on the revenue side, leave benefits untouched, and ask the highest earners to fund the fix.
The other end of that spectrum looks very different. Some Republican proposals would gradually raise the full retirement age, adjust the benefit formula to slow growth for higher-income retirees, or shift to a less generous cost-of-living index. A final deal, if one ever materializes, would almost certainly blend elements from both sides.
What neither party can afford to do is wait. Every year Congress delays, the size of the eventual fix grows. The 2024 Trustees Report estimated that closing the 75-year gap immediately would require either a payroll tax increase of 3.33 percentage points or an across-the-board benefit cut of about 20.8 percent. The longer lawmakers punt, the steeper those numbers climb. For the 68 million Americans who depend on Social Security checks, the debate over H.R. 1700 is not abstract. It is a question of whether Washington acts before 2035 forces the answer.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
