The AARP Public Policy Institute's report reveals that Social Security's taxable payroll has fallen from 41% of GDP in 1983 to a projected 34% by 2025. This decline means that if payroll tax revenue had kept pace with GDP growth, Social Security could have sustained full benefits until 2059, extending the program's financial health by 25 years beyond the current depletion projection of 2034.
Richard Johnson, vice president of financial security at AARP, emphasized that the program's financial challenges stem not only from an aging population but also from economic changes that have reduced the share of income subject to payroll taxes.
The report indicates that rising income inequality and shifts towards business and investment income, which are not taxed under the payroll system, have exacerbated funding issues. AARP suggests potential solutions, including raising the payroll tax cap for high-income earners and introducing new taxes on investment income, which could significantly close the funding gap.
A national survey indicated that a majority of Americans support a gradual increase in the payroll tax rate. The report warns that without reforms, Social Security will only be able to pay 83% of scheduled benefits by 2034, highlighting the urgency for Congress to act to secure the program's future