Romina Boccia and Ivane Nachkebia
The Brookings Institution recently released its Social Security plan, which would address the program’s unsustainable finances through a mix of tax increases, benefit reductions, and expanded coverage. The authors of the plan—Wendell Primus, Tara Watson, and Jack A. Smalligan—propose necessary reforms that lawmakers have long avoided, like raising the retirement age, but rely too heavily on tax hikes while avoiding bigger benefit reforms and automatic adjustments that would stabilize the program over the long-term. They also reject changes to Social Security’s structure, which was designed nearly a century ago to replace income rather than reduce old-age poverty.
Rather than tweak the program around the margins, Congress should reimagine Social Security in light of new fiscal and demographic realities by focusing government benefits on the most vulnerable seniors, lowering the tax burden on workers, and enabling more Americans to take control of their financial security.
Aligning the Eligibility Age with Rising Life Expectancy
The aging of the US population has been a primary driver of Social Security’s financial shortfall. Since the program’s inception, life expectancy at birth has increased by 16 years, while the fertility rate has significantly declined, dropping to its historic low in 2023. These demographic shifts have lowered the worker-to-beneficiary ratio—a critical measure of program sustainability since Social Security is structured as a pay-as-you-go tax and transfer scheme, not a savings or investment fund.
One of the most effective ways to address the impacts of demographic aging on program viability is to align eligibility ages to gains in longevity. However, Social Security’s full retirement age (FRA) has only increased by two years, from 65 to 67, a change that has taken more than 40 years to fully phase in.
The Brookings plan proposes gradually increasing the retirement age for the top 40 percent of earners, raising it from 67 to 70 for the top 20 percent, with smaller increases for those in the 61st and 79th percentiles. While this would be a step forward in strengthening the program’s finances, retirement age increases should apply universally, regardless of lifetime earnings.
Brookings’ rationale for this partial increase is lower life expectancy gains among low earners. However, an increase in the FRA doesn’t prevent anyone from claiming benefits at the early eligibility age (EEA) of 62. According to a recent Congressional Budget Office (CBO) report, raising the FRA to 70 would reduce average annual benefits by the same percentage across all earnings quintiles. Because low earners are more likely to have claimed disability benefits, CBO reports that raising the full retirement age reduces lifetime benefits the least for low earners and the most for high earners. This change by itself would make Social Security even more progressive.
Importantly, the Brookings plan fails to index the eligibility age to future life expectancy gains—a policy that many OECD nations, including Denmark, Finland, and Sweden, have adopted. Such a change would automatically adjust the age as longevity increases, eliminating the need for future legislative action. It’s tough enough to get Congress to make changes to Social Security, so when that happens, we should make sure those changes are robust and have longer-term effects.
Curbing Benefit Growth Beats Burdening Workers More
The Brookings plan would also increase the payroll tax rate from 12.4 percent to 12.6 percent. While this isn’t a significant tax hike—roughly $122 per year for a median earner—Social Security already takes too much from working Americans. And other benefit reforms could avoid that additional tax increase.
For example, Social Security’s flawed cost-of-living adjustment (COLA) formula overstates the effects of inflation, leading to benefit increases that are much higher than necessary to maintain seniors’ purchasing power. Adopting the chained CPI‑U—a more accurate index—would eliminate about three times more of the long-term shortfall than the proposed tax hike. Rather than raising the payroll tax, lawmakers should correct this costly miscalculation.
Brookings also proposes raising Social Security’s payroll tax cap to cover 90 percent of earnings, aiming to get “back to the historic […] level.” However, as their own report shows, this threshold was never the norm, only occurring briefly from 1937 to the early 1940s and around 1983 following further tax increases. For illustration, in 2024, covering 90 percent of earnings would have required increasing the cap from $168,600 to $346,500. Such a substantial tax hike on higher earners could discourage work and innovation, harming long-term economic growth. It is also worth noting that Social Security’s tax cap is higher than those of many Organisation for Economic Co-operation and Development, or OECD, nations, including Austria, Canada, and Germany.
A far better alternative would be reducing excessive Social Security benefits for wealthier retirees, which can exceed $60,000 per year. Providing benefits that are four times the senior poverty threshold serves no meaningful policy goal and is a result of Social Security’s unsustainable earnings-related structure. One targeted reform would eliminate COLAs for high-income retirees while applying the chained CPI‑U for the rest. This would erase about 40 percent of the program’s funding shortfall, much more than all the Brookings’ tax hikes would achieve.
Congress should also repeal the rule that increases benefits in real terms over time. Currently, initial benefits between retiree cohorts are increased based on average wage growth, which usually outpaces inflation. As a result, initial Social Security benefits rise faster than necessary to preserve their purchasing power. Switching from wage indexing to price indexing initial benefits would lock in current benefit levels and stop the increases in their real value over time. This reform alone could cover 85 percent of the program’s funding gap.
Rethinking Social Security
The Brookings plan maintains Social Security’s 90-year-old structure, based on the Bismarckian social insurance model, which is no longer suited to the modern era.
In 1935, a program designed to replace pre-retirement earnings might have been justified due to limited access to personal savings mechanisms. However, thanks to remarkable developments in financial technology, today’s workers can seamlessly save and invest through their smartphones, and most are quite capable of planning for their own retirements. Congress might consider the United Kingdom’s example and transition Social Security to a flat benefit model that provides more predictable benefits to prevent old-age poverty. The CBO estimates that replacing the current benefit structure with a universal flat benefit set at 150 percent of the federal poverty level would save over $280 billion in 10 years and fully eliminate the program’s long-term funding gap.
The Brookings Social Security plan overlooks Social Security’s core problem of excessive spending growth by focusing too much on revenue-side reforms while failing to address the unsustainable growth in retiree benefits. Instead of raising taxes on younger workers to sustain increases in already excessive benefits, Social Security should be downsized to reduce its drag on the federal budget and the economy. This can be achieved by aligning the program’s eligibility age with improvements in life expectancy and changing benefit formulas to slow future benefit growth and eliminate further benefit increases for higher earners. Over the longer term, Congress should move beyond tweaks to the current outdated system and reimagine Social Security as an anti-poverty backstop, lowering future worker tax burdens by focusing on protecting vulnerable seniors while enabling more Americans to save to achieve personal financial security.
Romina Boccia recently participated in a Brookings Institution event, where she shared her thoughts on the Brookings Social Security plan and discussed how to improve the American retirement system. Watch the full event video below.
