Who Wins, Who Loses

CRFB frames the proposal as a progressive one — meaning the cost falls almost entirely on the retirees best equipped to absorb it, while protecting the benefits that lower- and middle-income retirees rely on most heavily.

According to the Urban Institute’s modeling, by 2065 the top fifth of earners would see their benefits reduced by about 19% relative to current law, with the top 5% of earners facing similar reductions. By contrast, the bottom fifth of earners would see only a 3% reduction. Looking at a nearer-term horizon, the analysis found that by 2055, benefits for the top quintile of earners would be roughly 6% lower than under current law, and 7% lower for the top 5% of earners specifically.

In terms of program-wide impact, CRFB estimates that setting the cap at the 75th percentile would generate about $115 billion in savings over ten years and close roughly one-tenth of Social Security’s long-term funding gap. Setting the cap higher, at the 90th percentile, or lower, at the 50th percentile, would close a smaller share of the gap — CRFB estimates as little as one-twentieth to as much as one-quarter of the shortfall depending on where the threshold is set.

Importantly, the group’s modeling also suggests the proposal wouldn’t just avoid hurting the bottom three-quintiles of earners — it could actually increase their payable benefits over time, since a more solvent trust fund reduces the risk of the across-the-board benefit cuts that would otherwise be triggered by insolvency.