Attendees hold “Protect Social Security” and “Tax The Billionaires” signs during a rally in Melbourne, Florida, on Saturday, Oct. 17, 2026.
Eva Marie Uzcategui | Bloomberg | Getty Images
According to a new report from the AARP Public Policy Institute, the taxable payroll that funds Social Security—providing monthly benefits to millions of Americans—has declined as a share of gross domestic product over the last forty years.
If payroll tax revenues had kept pace with GDP, the program could have paid full benefits until 2059, according to the research. This represents an additional 25 years beyond the latest projected depletion date of 2034 for the program’s combined trust funds. The AARP Public Policy Institute, a nonprofit, nonpartisan organization representing Americans aged 50 and older, provides policy research, analysis, and development.
“Social Security’s finances have weakened not simply because America has aged, but because the economy has transformed while the program’s revenue structure has remained stagnant,” said Richard Johnson, vice president of financial security at the AARP Public Policy Institute, during a Tuesday press briefing.
“America’s economy is larger and more productive than it was four decades ago, yet Social Security is drawing support from a diminishing share of that economic output,” Johnson added.
How Social Security has fallen behind
In June, Social Security’s trustees projected that the program’s combined retirement and disability trust funds could be depleted by the third quarter of 2034. Without legislative action, only 83% of scheduled benefits would remain payable at that point, according to official projections.
The trustees’ report also indicated an earlier projected depletion date for the sole retirement trust fund in the fourth quarter of 2032, when 78% of benefits would be payable. However, AARP based its analysis on the later 2034 date, noting that Congress has previously shifted resources between the funds.
The program’s current shortfall is more severe than lawmakers anticipated in 1983, when the last major reforms were enacted.
According to research from the Roosevelt Institute, a New York-based think tank, rising income inequality means the payroll tax cap no longer covers 90% of total earnings—a figure lawmakers expected to remain constant during the 1983 reforms. The share of earnings subject to Social Security payroll taxes fell to approximately 83% by 2000 and has since remained mostly stable.
AARP highlights an aging population as a key factor in Social Security’s funding challenges. The worker-to-beneficiary ratio is projected to drop from 3.4 to 2.4 between 2000 and 2030, a trend further exacerbated by declining fertility rates.
Shifting income patterns have also reduced the share of U.S. GDP subject to the Social Security payroll tax. Taxable payroll fell from 41% of GDP in 1983 to 34% in 2025, a level that the program’s trustees project will persist, according to AARP.
AARP attributes this decline to a shift away from wages toward business and investment income, which is generally exempt from payroll taxes. Additionally, automation has lowered labor demand, and pass-through business structures allow some owners to classify compensation as profits rather than wages, according to the report.
If taxable payroll had remained at 41% of GDP, Social Security would have collected $10.8 trillion in additional revenue between 1984 and 2034, according to AARP’s calculations, adjusted to 2025 dollars.
In 2026, wages up to $184,500 are subject to the Social Security payroll tax.
According to AARP’s research, payroll taxes accounted for 91% of Social Security’s revenues in 2025, while interest income contributed 5%, and federal income taxes paid by high-income beneficiaries on their benefits made up 4%.
‘The fix for Social Security’
To boost Social Security’s revenues, lawmakers might consider adjustments that require higher-income taxpayers to contribute more to the program while shielding low- to moderate-income earners, according to the AARP report.
“The solution for Social Security isn’t cutting earned benefits; it’s rebuilding the revenue foundation that supports them,” Johnson stated.
Raising the payroll tax threshold—which is annually adjusted to keep pace with average wages—would not impact most workers, as only 6% of individuals had earnings at or above the cap in 2024, according to AARP.
In 2027, the maximum taxable earnings threshold for Social Security is set to rise to $192,300.
Bills introduced in Congress aim to raise the cap to higher thresholds, such as $250,000 or $400,000, or to eliminate it entirely. According to AARP research based on Social Security Administration assessments, eliminating the cap would close 67% of the 75-year funding gap, assuming workers do not receive a benefit increase in exchange for the additional contributions.
Another option involves lawmakers shoring up the program by taxing income not currently subject to Social Security payroll taxes, according to AARP. This comes as business activity has increased through pass-through entities—such as sole proprietorships, partnerships, limited liability companies, and S corporations.
Lawmakers could establish a new tax on investment income to help fund Social Security’s trust funds. According to AARP, citing research from Social Security’s actuaries, a new 12.4% tax on investment income for active S corporation officers and limited partners would close approximately 25% of the program’s 75-year financing gap.
One option not mentioned in the AARP research is raising the payroll tax rate, currently set at 6.2% for both workers and employers, or 12.4% combined. Social Security’s trustees estimated that increasing the combined rate to 16.65% starting in January 2026 would ensure the combined program remains solvent for the 75-year period ending in 2100.
A national survey conducted in February found that 62% of individuals would support a gradual increase in the payroll tax from 6.2% to 6.5%, according to the University of Maryland School of Public Policy. The poll surveyed 2,509 adults.
The 1983 Social Security reforms introduced several changes to benefits, including gradually raising the retirement age from 65 to 67, delaying cost-of-living adjustments by six months, and taxing Social Security benefits.
Research indicates that these changes have reduced lifetime retirement benefits by approximately 19% for individuals turning 65 in 2026 compared to what they would have received under the previous rules, according to Jenn Jones, vice president of financial security and livable communities at AARP, who spoke during the Tuesday press briefing.
While AARP has not endorsed any specific benefit changes, Jones stated that the organization opposes cuts to monthly checks.
“Millions of Americans—we hear from them every day—cannot afford to lose a single penny,” Jones said.