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By Sam Stevenson
Associate News Editor
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A former Social Security trustee has warned that the U.S. retirement system is heading toward a funding shortfall, while arguing that the fix is straightforward: Make higher earners pay more into the program.
Former Labor Secretary Robert Reich said in a video posted on social media that Social Security may be unable to pay full benefits by 2032 partly because of income inequality and capped payroll taxes.
New projections show the main retirement trust fund could run dry sooner than expected, raising the risk of across-the-board benefit cuts. More than 70 million Americans who rely on Social Security—including retirees, disabled workers and survivors—could see reduced payments if no policy changes are made.
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Why It Matters
Social Security has been paying out more than it collects for years, forcing it to draw down reserves that are now projected to be exhausted within the next decade. Without action from Congress, benefits would not disappear but could fall to roughly three-quarters of their current levels.
The growing imbalance reflects not only demographic shifts, including an aging population and slower workforce growth, but also deeper structural issues around how income is taxed for Social Security.
The impact of reduced Social Security benefits would not be felt evenly across the country, with some states far more exposed than others.
Reich Explains How the System Broke
Reich said policymakers "failed to anticipate" how much income would shift to top earners, leaving a growing share of wages outside the system's tax base.
While the retirement of baby boomers is frequently blamed, he says policymakers anticipated that decades ago and took steps to address it. Instead, he pointed to widening income inequality as a central, under-discussed factor.
A growing share of national earnings now flows to top earners, but much of that income is not subject to Social Security payroll taxes because of a cap. Under the current system, wages above a set threshold—$160,200 in 2023—are not taxed for Social Security.
That means a worker earning below the cap pays payroll tax on all their income, while someone earning millions pays it on only a small fraction.
Reich used a stark example to illustrate the imbalance: a CEO earning $20 million annually effectively pays Social Security taxes on about 1 percent of their income, while a typical worker contributes on 100 percent of theirs.
As more wealth concentrates at the top, a larger portion of total national income escapes taxation for Social Security.
He argues that this shift has come at a significant cost. Since the 1980s, the growing gap between average wages and high-end income has reduced the program's revenue by an estimated $1.4 trillion.
In Reich's telling, the issue is not simply demographic pressure, but a tax structure that has not kept pace with economic changes.
The Proposed Fix: 'Scrap the Cap'
Reich describes the solution as "obvious": Eliminate the cap on income subject to Social Security taxes so higher earners contribute more.
Some proposals in Congress would go further, applying payroll taxes to earnings above a higher threshold—such as $250,000—and potentially extending them to certain forms of investment income.
According to estimates Reich cited, such changes could extend the program's solvency for decades without raising taxes on the vast majority of households.
He frames the debate in terms of fairness as much as funding, arguing that ensuring long-term stability requires asking wealthier Americans to contribute a larger share.
At the same time, the broader outlook remains uncertain. Recent projections show that the Old-Age and Survivors Insurance Trust Fund could be depleted by 2032—earlier than previously expected—after which incoming payroll taxes would cover only about three-quarters of scheduled benefits.
What Happens Next
Policymakers have not yet agreed on a path forward, and competing proposals include raising taxes, reducing benefits or further increasing the retirement age.
For now, Reich's message is aimed at reframing the conversation: The system's challenges, he suggests, are not about aging demographics but about how income is distributed—and taxed—across the economy.
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