Millions of Social Security recipients could see their monthly checks rise by an average of $200 per month under a Senate proposal that would fund the increase by taxing individual earnings above $250,000. The Social Security Expansion Act, designated S. 770 in the 119th Congress, was introduced on Feb. 27, 2025, by Sen. Bernie Sanders, an independent from Vermont. The bill creates a split taxing structure that leaves a gap between the current payroll-tax cap and the new $250,000 threshold, a design choice with real consequences for how much new revenue the measure would actually generate.
How the $250,000 threshold and the taxable maximum interact
Under current law, workers and employers each pay 6.2 percent of wages into Social Security, but only on earnings up to an annual cap known as the taxable maximum. The Social Security Administration sets that cap at $176,100 for 2025 and $184,500 for 2026, adjusting it each year using a wage-index formula. Earnings above the cap are exempt from the 12.4 percent combined OASDI payroll tax.
S. 770 would reapply that 12.4 percent tax to earnings above $250,000, but it would not eliminate the existing cap. The result is a “donut hole,” a band of income between the taxable maximum and $250,000 that remains untaxed. For 2025, that gap spans roughly $74,000 of earnings. Because the taxable maximum rises with wages each year while the $250,000 floor in the bill is fixed, the donut hole will narrow over time as the cap climbs toward $250,000. That narrowing means new revenue from the provision grows gradually rather than arriving all at once, a meaningful difference from proposals that would simply scrap the cap entirely.
The design also means that workers with earnings just above the current cap but below $250,000 would see no change in their payroll tax bills. In contrast, very high earners would again pay Social Security taxes on a portion of their income, with the tax restarting at the $250,000 mark. Because the bill does not create additional benefit credits for these higher taxed earnings, the extra contributions would primarily serve to bolster the program’s finances and pay for the promised benefit increases.
Benefit increases and the CPI-E switch in S. 770
On the spending side, Sanders framed the legislation as delivering an average benefit increase of $2,400 per year. The bill would also change how annual cost-of-living adjustments are calculated by switching from the standard Consumer Price Index to the CPI-E, a research index produced by the Bureau of Labor Statistics that tracks spending patterns of Americans aged 62 and older. The CPI-E tends to weight medical care and housing more heavily, categories where older households spend disproportionately. Because those components often rise faster than overall inflation, using CPI-E would likely produce somewhat larger cost-of-living adjustments over time than the current formula.
The Bureau of Labor Statistics classifies the elder index as experimental, and it has never been adopted for official statutory purposes. That status raises implementation questions, including how the index would be maintained, whether its methodology might change, and how Congress would respond if CPI-E diverged sharply from the broader inflation measures used elsewhere in federal law. Nonetheless, advocates argue that it better reflects retirees’ real-world costs and helps prevent benefits from eroding in purchasing power as beneficiaries age.
Beyond the cost-of-living change, S. 770 would increase the basic benefit formula, boosting checks for both current and future beneficiaries. The Congressional Research Service summary notes that the measure combines these benefit expansions with new revenue from high earners rather than cutting scheduled payments or raising the full retirement age. That approach positions the bill as an expansion package rather than a traditional solvency or austerity plan.
Missing solvency scores and unresolved design questions
While the bill’s text spells out the tax and benefit changes, it does not by itself answer how much the proposal would improve Social Security’s long-term finances. For that, lawmakers typically rely on formal estimates from the Office of the Chief Actuary, which publishes analyses of major reform plans on the agency’s solvency page. As of the latest available information, S. 770 has not been accompanied by a public actuarial memorandum detailing its precise impact on the trust fund’s projected exhaustion date or the size of any remaining shortfall.
The absence of a published solvency score leaves several key questions unresolved. It is unclear, for example, whether the combination of higher taxes on earnings above $250,000 and larger benefits would fully close the program’s long-range deficit, or merely reduce it while still requiring additional adjustments in future legislation. It is also uncertain how sensitive the projections would be to assumptions about wage growth at the top of the income distribution, where earnings can be volatile and concentrated.
Design choices embedded in the bill add further complexity. The fixed $250,000 threshold means that, over time, more workers could be subject to the resumed payroll tax as nominal wages grow, even though the initial intent is to focus on high earners. Meanwhile, keeping the donut hole in place for a number of years delays the full revenue effect, potentially limiting the near-term improvement in the trust fund’s balance. Analysts will likely scrutinize whether this staggered phase-in aligns with the timing of the program’s projected cash shortfalls.
Procedurally, the measure was referred to the Senate Finance Committee after introduction and has not advanced to a hearing or markup. Without committee action, the proposal functions more as a marker bill that outlines a preferred policy framework than as legislation on the brink of passage. Still, the detailed statutory language available on Congress.gov gives lawmakers and outside experts a concrete text to model, while the all-info page tracks its sponsorship and any subsequent legislative activity. As debates over Social Security’s future intensify, the choices embedded in S. 770-how to tax high earnings, how to measure inflation for seniors, and how aggressively to expand benefits-are likely to remain central points of contention.
