HR-4968-119
Referred to the Committee on Ways and Means, and in addition to the Committees on Energy and Commerce, and Education and Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Sponsored by Jill Tokuda (D-HI)
What it does
This bill would switch the formula used to calculate Social Security cost-of-living adjustments (COLAs) from the current Consumer Price Index to a new Consumer Price Index for Elderly Consumers (CPI-E), which the Bureau of Labor Statistics would newly create and publish. It would also gradually phase out the cap on wages and self-employment income subject to Social Security payroll taxes between 2026 and 2031, taxing 100% of income above the current cap by 2032, and would include those "surplus" earnings above the cap in the benefit formula at reduced credit rates (3% and 0.25% factors) so high earners' future benefits would rise somewhat but not proportionally to their added tax contributions.
Who benefits
All Social Security beneficiaries, particularly seniors and people with disabilities whose medical and housing cost inflation is often higher than the general CPI, would likely see somewhat larger annual COLA increases under CPI-E. Beneficiaries would also be protected because the bill exempts COLA increases from counting as income for SSI and Medicaid eligibility. The Social Security Trust Funds would benefit from increased payroll tax revenue collected from high earners, potentially improving long-term solvency of the program.
Who is hurt
High-income workers and self-employed individuals earning above the current taxable maximum (about $176,100 in 2025) would pay substantially more in payroll taxes as the cap phases out, though they would receive only partial additional benefit credit in return. Employers of high earners would face increased payroll tax matching obligations. Some budget analysts note the CPI-E has historically run slightly higher than the standard CPI, meaning federal COLA-linked spending would rise incrementally over time, a cost ultimately borne by taxpayers funding the program.
Supporters argue
Supporters argue that CPI-E better reflects the actual spending patterns of seniors, who spend disproportionately more on healthcare and housing costs that have risen faster than general inflation, so switching to it would make COLAs fairer and prevent erosion of purchasing power. They also argue that lifting the payroll tax cap on high earners is a matter of basic fairness, since currently income above roughly $176,100 escapes Social Security taxation entirely, and phasing in full taxation would substantially extend the solvency of the Trust Funds without cutting benefits for anyone.
Opponents argue
Opponents argue that phasing out the payroll tax cap breaks the traditional link between contributions and benefits that has defined Social Security since its creation, transforming it from an insurance-based system into something closer to an income-redistribution program funded increasingly by a small group of high earners. They also contend that the reduced benefit credit rates for surplus earnings (3% and 0.25%, versus the standard 32% and 15% bend-point rates) mean high earners would pay dramatically more in taxes for comparatively little additional benefit, raising concerns about the program's fairness and long-term political support.
Constitutional context
Social Security taxes and benefits rest on Congress's taxing and spending power under Article I, Section 8, Clause 1; the Supreme Court in Helvering v. Davis (1937) upheld Social Security's payroll tax and benefit scheme as a valid exercise of this power, and courts have consistently deferred to Congress's broad discretion to modify tax rates and benefit formulas.
Checks and balances
Congress would directly set new tax rates and benefit formulas through statute, with the Social Security Administration and IRS implementing them administratively and courts available to review any procedural or equal-protection challenges, though such changes have historically survived judicial scrutiny.
Historical precedent
Congress has adjusted the Social Security taxable maximum and COLA formulas multiple times since 1935, including automatic annual cap increases indexed to wage growth, but a full phase-out of the cap combined with a CPI-E-based COLA has not previously been enacted.