Social Security benefits for retirees would increase modestly under two linked changes. The annual cost-of-living adjustment (COLA) — which determines how much benefits rise each year — would shift from tracking general consumer prices (CPI-W) to tracking a new index specifically measuring what Americans 62 and older actually spend (CPI-E), which typically rises faster and reflects higher healthcare and housing costs for seniors. Separately, the payroll tax wage cap (currently around ,000) would be phased out between 2026 and 2032, meaning workers and employers would pay Social Security taxes on earnings above the cap — starting at 86% of excess wages in 2026 and rising to 100% by 2032. Earnings above the cap would also count toward the benefit formula at a reduced rate (3% and 0.25%), so higher earners would eventually receive slightly larger benefits. The CPI-E increase would not reduce eligibility for SSI or Medicaid.
Average Household Impact
- Social Security COLA calculation — switches from CPI-W to CPI-E, which tracks elderly spending and typically rises faster
- Payroll tax on high-wage earnings — phases in FICA liability on wages above the current cap (~k) from 2026 through 2032
- Benefit formula for surplus earnings — adds a reduced-rate credit (3% / 0.25%) for earnings that exceed the historical wage cap
Congressional Summary
Protecting and Preserving Social Security ActThis bill eliminates the cap on income subject to Social Security taxes and revises methods for calculating various aspects of Social Security benefits.Under current law, Social Security has a taxable maximum, which refers to the maximum amount of a worker's earnings that are subject to Social Security payroll taxes (set at $176,100 in 2025). The taxable maximum also serves as the maximum amount of earnings used to calculate a worker's Social Security benefits.This bill phases out the taxable maximum so as to apply payroll taxes to all earnings after 2031, and revises the method used to calculate a worker’s Social Security benefits to account for earnings in excess of the taxable maximum.The bill also revises the method of calculating cost-of-living adjustments to Social Security benefits to reflect the spending habits of individuals over the age of 62. An increase in Social Security benefits resulting from this change may not be treated as income for purposes of determining eligibility for, or the amount of assistance provided under, the Medicaid or Supplemental Security Income programs.
Details
- Congress
- 119th
- Chamber
- Senate
- Status
- summarized
- Action
- Introduced in Senate
- Action Date
- 2025-07-31
- Date Added
- 2026-06-04
- Source
- Congress.gov →
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