The following are comments based on the a11y maintainers' discussion during the office hours today (and not a recommendation for moving this forward -- we are putting them here for reference). A maintainer will follow up with an actual recommendation shortly.
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When providing a toggle switch, it is useful to focus the label on the function which is changing rather than changing the whole text. We aware that needs of screen reader users may be at odds with the needs of people with cognitive disabilities.
In order to prevent confusion for both an individual using a screen reader (changing the label of a toggle element), and an individual with a cognitive disability that can make it difficult to generalize concepts and need things to be direct and explicit.
In this case, a label of "password visibility" would focus on the function of the toggle instead of the state, which can avoid this conflicting confusion.
A screen reader user will also have an affordance through the screen reader indicating the current state, so the same would need to be present for a sighted user. Example: an icon that changes its qualities to convey the current state to the user. It should not be assumed that the actually presence of a visible password is sufficient to convey the current state to a sighted user.
I am supportive of this nomination!
During the A11y office hours, we added an AI generated summary to the description. This still needs to be validated by a human, but we are hoping this might help us make it easier to address issues.