As the repayment pressures on the U.S. Social Security Trust Fund approach, discussions in Washington regarding revenue-increasing measures are intensifying. What was once long considered a political no-go zone—increasing taxes on social security—is now no longer completely off-limits for some Republican lawmakers. The focus has shifted to raising the payroll tax rate or increasing the upper limit on taxable income.

Republican lawmakers start to soften their stance

Currently, in the United States, employees and employers each contribute 6.2% of their wages to social security taxes, with a wage cap of $184,500 per year. Wages above this amount are not subject to additional taxation, which results in higher-income individuals contributing a relatively smaller proportion of their income to support the social security system.

Rep. Tom Cole of the Oklahoma Republican Party recently stated that he is willing to consider raising tax rates and also increasing the range of taxable income. He said that if there is a payment crisis for the fund, the political and social consequences would be even more severe.

Pennsylvania Republican Representative Lloyd Smucker also stated that raising the income threshold for wage tax application could be part of a solution. He said that Congress cannot sit by and watch benefits automatically cut down in a few years; they must address the issues of population structure and funding gaps.

Both parties' proposals aim to increase revenue.

In June of this year, Ohio Republican Senator Bernie Moreno co-authored an article with Democratic Senator Elizabeth Warren, advocating for the abolition of the current wage tax income cap. The two cited estimates from Peter G and Peterson Foundation which suggest that such a change could generate an additional $3 trillion in revenue for social security programs over the next 10 years.

On the Democratic side, Senator Sheldon Whitehouse and Representative Brendan Boyle also proposed a plan to increase revenues. Unlike completely abolishing the cap, they advocate raising the threshold for wage tax eligibility to $400,000 and including investment earnings within the taxable scope.

From the current discussions, it seems that Congress is more inclined to focus on increasing revenue rather than directly cutting benefits. At least on the public level, there is almost no one in Washington advocating for recipients to bear a significant reduction in their benefits.

Debt-financed investment in the stock market is under scrutiny

Another cross-party proposal comes from Republican Senator Bill Cassidy and Democratic Senator Tim Kaine. The two hope to borrow $1.5 trillion from the government to establish an investment fund that will allocate funds to risky assets such as stocks, and rely on long-term investment returns to support the social security system.

This approach attempts to fill the gap without increasing taxes or cutting benefits. However, a recent simulation by the Retirement Research Center at Boston College suggests that the plan is not sound. The study indicates that if the stock market continues to maintain its historical average returns over the next few decades, it could theoretically generate sufficient income, but market volatility means that the results are not stable.

Researchers indicate that once the volatility of stock returns is taken into account in the calculations, this approach of "betting on the market" does not guarantee success. In other words, if the financing gap for social security mainly relies on the returns of high-risk assets, there may still be significant uncertainties in actual implementation.