The Social Security Trustees estimate that the OASI program’s trust fund will exhaust in 2032, necessitating an across-the-board benefit cut absent Congressional action.
Policymakers have three main levers to restore fiscal sustainability in the system: cut benefits, adjust taxes, borrow money, or some combination of the three. Senators Elizabeth Warren (D-MA) and Bernie Moreno (R-OH) have proposed raising the taxable maximum (“taxmax”) so higher earners pay taxes on more of their income.
To see how this proposal would affect the program’s finances, it helps to understand how Social Security taxes and benefits are calculated.
On the tax side, workers and their employers each pay 6.2% of their wages, and self-employed workers pay the entire 12.4%. Workers don’t pay taxes on all of their annual earnings; instead, they pay that rate up to the taxmax, which is $184,500 in 2026 and increases with wage inflation each year (the same index used to grow benefits). The 1977 Amendments set the taxmax so that about 90% of covered wages fell below it, a share still roughly intact in 1983. That 90% figure has since become a common benchmark in reform proposals. Today, due to changes in the workforce, growing inequality, and other factors, only about 83% of total earnings are covered by these taxes.
On the benefits side, Social Security benefits are calculated in two primary steps. First, every worker’s annual earnings are wage-indexed, which allows earnings in earlier years to reflect current wage levels. A worker’s highest 35 years of indexed earnings are summed and divided by 420 months (35 years times 12 months) to generate what is called the Average Indexed Monthly Earnings or AIME.
Second, the AIME is run through a progressive formula with “bend points” that split it into brackets based on when the individual beneficiary turns 62. For example, a worker who turned 62 in 2020 faced bend points of $960 and $5,785; a worker who turns 62 in 2026 faces bend points of $1,286 and $7,749. The bend rates—the share of a worker’s AIME replaced in each of the three resulting brackets—are the same for everyone. In the lowest bracket, the bend rate replaces 90% of the AIME, 32% in the middle bracket, and 15% above the highest bend point. Because the AIME is built from earnings capped each year at the taxmax (the same cap that determines which earnings are subject to payroll taxes) benefits stop accruing at exactly the point where taxes stop being collected. Above the taxmax, a worker owes no additional payroll tax and earns no additional benefits.
The resulting number is the worker’s monthly benefit, or Primary Insurance Amount (PIA). (There are a variety of detailed complications and adjustments–such as benefit reductions for claiming before the worker’s full retirement age and additional benefits for claiming after the full retirement age–that are not necessary to this basic explanation.)
Let’s take an example beneficiary SSA describes on its benefit explanation webpage: A worker born in 1964 and who retires in 2026 at age 62. With the AIME, bend points, and bend rates, we can calculate this worker’s monthly benefit or PIA amount:
| AIME | First Bend Point | Second Bend Point | Formula Applied to AIME | Monthly Benefit Amount |
|---|---|---|---|---|
| $5,825 | $1,286 | $7,749 | 90%($1,286) + 32%($5,825 − $1,286) + 15%($0) | $2,609.88 |
Because this worker’s AIME doesn’t extend beyond the second bend point, their earnings are not subject to the 15% bend rate.
By raising the taxmax, the Warren-Moreno proposal would bring more tax revenue into the Social Security system. Currently, all income above the taxmax ($184,500 in 2026) is exempt from Social Security tax so increasing that limit would mean more money into the program. Under the current formula, it would also lead to higher AIMEs and thus higher benefits for higher earners.
For a worker to receive the maximum possible monthly Social Security retirement benefit, they would need to earn at or above the taxmax in every year and claim at age 70–this would yield a monthly benefit of $5,108. There were about 80,000 workers receiving the maximum benefit in 2025, roughly about 0.15% of the total 53.6 million retired-worker beneficiaries. More generally, workers who earned the taxmax in every year and claim at their full retirement age would have received about $4,043 per month. Again, there are relatively few of those workers–in 2025, about 1.65 million beneficiaries received $4,000 or more per month, or about 3.1% of all retired-worker beneficiaries.
Some argue that simply raising the taxmax won’t do enough to address insolvency on its own. Because more taxes translate to higher benefits under the current system, raising the taxmax without adjusting the benefit formula brings in more revenue than it pays out in new benefits; so it does improve solvency, just by less than the added revenue alone would suggest. (My guess is that an actual Warren-Moreno proposal will adjust the benefit formula, but we don’t know that yet.) If the higher taxmax cutoff were combined with a change in the benefit formula–say, a new bend point–where the new bend rate were lower than 15%, the proposal would bring in even more money relative to what it pays out.
To see how that combination could play out, I built a straightforward tool centered around a single earner (the other example beneficiary SSA shows on its benefit explainer page). This worker is born in 1959 and retires in 2026 at age 67. This worker earns the taxmax in every year, so their benefit is the maximum any worker born in that year and claiming in that year would earn. The current benefit calculation therefore yields the following:
| AIME | First Bend Point | Second Bend Point | Formula Applied to AIME | Monthly Benefit Amount |
|---|---|---|---|---|
| $11,463 | $996 | $6,002 | 90%($996) + 32%($6,002 − $996) + 15%($11,463 − $6,002) | $3,317.47 |
In this case, because the worker turns 62 in a different year than our previous worker, the bend points are different. And because their AIME is above the second bend point, their monthly benefit is subject to the 15% bend rate.
With the tool below, you can adjust this worker’s earnings, increase the taxmax, add new bend points, and adjust the bend rates to see how taxes paid and benefits received change. As you’ll see, simply increasing the worker’s earnings does nothing to affect their benefits because the higher earnings are above the cutoff, so the added income doesn’t factor into the benefit calculation. But increasing their earnings along with increasing the taxmax will increase benefits, though not at a one-to-one rate.
This tool is not intended to simulate the overall fiscal impacts of a higher taxmax proposal on the Social Security system (see the Urban Institute’s DYNASIM model). Instead, it seeks to demonstrate how simultaneously raising the taxmax and adjusting the benefit formula would affect a representative worker.
