Social Security's taxable payroll has fallen from 41% of gross domestic product in 1983 to 34% as of 2025, according to a new report from the AARP Public Policy Institute. If payroll tax revenue had kept pace with GDP growth over the past four decades, the program could pay full benefits until 2059, instead of the projected depletion date of 2034.
"America's economy is larger and more productive than it was four decades ago, but Social Security is receiving support from a smaller share of that economy," said Richard Johnson, vice president of financial security at the AARP Public Policy Institute.
The trustees project that Social Security's combined retirement and disability trust funds will be depleted in the third quarter of 2034. At that point, 83% of scheduled benefits will be payable without congressional action.
Social Security's revenue challenges stem from multiple shifts in the economy. Rising income inequality means the payroll tax cap, currently set at $184,500 in wages for 2026, no longer covers 90% of earnings as lawmakers intended in 1983. The share of earnings subject to payroll taxes fell to around 83% in 2000 and has mostly stabilized there. Additionally, a declining worker-to-beneficiary ratio will fall from 3.4 to 2.4 between 2000 and 2030.
Income patterns have also changed. More compensation now flows through business and investment income rather than wages, both of which are largely outside the payroll tax system. In 2024, only 6% of individuals had earnings at or above the payroll tax cap.
To rebuild revenue without cutting benefits, the AARP report suggests several options. Raising the payroll tax cap to higher thresholds like $250,000 or $400,000, or eliminating it entirely, would generate additional revenue. Eliminating the cap would close 67% of the 75-year funding gap if workers do not receive benefit increases for those contributions.
A new 12.4% tax on investment income for active S corporation officers and limited partners could close about 25% of the funding gap.
"The fix for Social Security isn't cutting earned benefits; it's rebuilding the revenue behind them," Johnson said.