Social Security Could Pay Full Benefits Until 2059 If Payroll Tax Kept Pace

The AARP Public Policy Institute reported that Social Security's taxable payroll, which funds monthly benefits for millions, has declined as a share of U.S. gross domestic product (GDP) over the past 40 years. If payroll tax revenue had kept pace with GDP growth, the Social Security program could pay full benefits until 2059, 25 years beyond the latest projected depletion date of 2034 for its combined funds.

The Social Security trustees projected in June that the program's combined retirement and disability trust funds may be depleted by the third quarter of 2034, at which point only 83% of scheduled benefits would be payable without congressional action. The retirement trust fund alone is projected to be depleted by the fourth quarter of 2032, with 78% of benefits payable then. The AARP analysis used the later 2034 date because Congress has reallocated funds between these trust funds in the past.

The decline in taxable payroll share is attributed to rising income inequality reducing the payroll tax base and demographic changes such as an aging population and falling worker-to-beneficiary ratios. The share of earnings covered by payroll taxes fell from 90% at the 1983 reforms to about 83% today, while taxable payroll as a portion of GDP dropped from 41% in 1983 to 34%. These trends reduce Social Security's revenue compared to the size of the economy.

This matters because Social Security is a critical program for millions of Americans relying on fixed monthly benefits. Without revenue growth aligned to economic growth, the program faces a funding shortfall that will reduce benefits in the mid-2030s. The timing of fund depletion influences policy decisions impacting retirement income stability.