One option to help shore up Social Security’s long-term solvency would be to increase the payroll tax rate, which is currently 12.4 percent (half paid by employees and half by employers) on wage earnings subject to the tax. According to an analysis from the Social Security Administration (SSA), increasing the payroll tax by 1 percentage point (from 12.4 percent to 13.4 percent) could raise $601 billion in new revenues for Social Security over a 10-year period and shrink the program’s 75-year shortfall gap, or long-range actuarial deficit, by 26 percent.

Another policy option to increase revenues for Social Security is to raise or eliminate the cap on the amount of income subject to the Social Security tax. In 2025, workers pay Social Security tax on only the first $178,100 of income. According to the Congressional Budget Office (CBO), increasing the taxable income limit to 90 percent of earnings, or $305,100, would increase revenues by $728 billion and close the 75-year solvency gap by 21 percent. According to the SSA, eliminating the taxable maximum subject to the Social Security tax altogether would raise $3.2 trillion over 10 years. Such a reform would reduce the long-range actuarial deficit by 53 percent.

Another solution for improving the solvency of Social Security is to change the amount that retirees can receive when they first apply for benefits. Many proposals combine a reduction in benefits for high earners with an increase in benefits for lower earners. One such proposal is to establish a uniform social security benefit. If all beneficiaries received 150 percent of the federal poverty level (FPL), CBO estimates that spending would decrease by $283 billion. If benefits were pegged to 125 percent of the FPL, spending would decrease by $607 billion and reduce the long-range actuarial deficit by 183 percent.

Other options for adjusting benefits include slowing the growth of retirees’ benefits over time by changing the cost-of-living index. Many economists believe that Social Security uses an index that overstates inflation, so benefits grow faster than the true cost of living. They propose replacing the current index with chained-CPI, which is a more accurate measure of inflation. CBO estimates that such a reform would reduce spending by $204 billion over 10 years. SSA estimates that it would reduce the long-range actuarial deficit by 16 percent.

Importantly, most proposals that reduce benefits exempt those individuals who are in retirement, or near retirement (i.e., 55 years old and above). Many policymakers feel that this is a fairer way to reform the program, giving people sufficient time to prepare for their retirement.

Given that overall life expectancy continues to increase, many policymakers have called for a modification to the program in which the full retirement age is gradually raised. According to an analysis from CBO, gradually increasing the full retirement age by two months per year until it reaches 70 would save $95 billion over a 10-year period. CBO estimates that the reform would close the structural mismatch between Social Security’s revenues and spending by 33 percent in the 75-year projection period. There are also important options to consider that would exempt those whose work includes demanding physical labor, as well as considerations for differences in life expectancy among different groups of Americans.

Under current law, state and local governments can opt out of enrolling their employees in Social Security if they instead provide a separate retirement plan, such as a pension. Today, roughly one-quarter of all state and local government employees are not covered by Social Security, and thus are not subject to the Social Security payroll tax. According to a 2020 CBO analysis, expanding Social Security coverage to include all state and local government employees hired after December 31, 2020, would raise $101 billion in new revenues for the program over a 10-year period. It would, however, also increase spending over time for those beneficiaries.