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Social Security's taxable payroll, which provides most of the revenue for the program that pays monthly benefits to millions of Americans, has fallen as a share of gross domestic product over the past four decades, according to a new report from the AARP Public Policy Institute.
Had payroll tax revenue kept up with GDP, the program could pay full benefits until 2059, according to the research — an additional 25 years beyond the latest projected depletion date of 2034 for the program's combined funds. The AARP Public Policy Institute provides policy research, analysis and development at AARP, a nonprofit, nonpartisan organization that represents Americans ages 50 and over.
"Social Security's finances have weakened not simply because America has grown older, but because the economy has changed, while the program's revenue system has not," Richard Johnson, vice president of financial security at the AARP Public Policy Institute, said during a Tuesday press briefing on the research.
"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," Johnson said.
Social Security's trustees projected in June that the program's combined retirement and disability trust funds may be depleted in the third quarter of 2034. Unless Congress takes action, 83% of scheduled benefits will be payable at that time, according to the trustees' projections.
The trustees' report also included an earlier projected depletion date for Social Security's retirement trust fund — the fourth quarter of 2032, when 78% of benefits would be payable. However, the AARP said it based its analysis on the later 2034 date because Congress has shifted money between the funds in the past.
The program's current shortfall is worse than lawmakers had anticipated in 1983, when the last major Social Security reforms were enacted.
Rising income inequality means the payroll tax cap no longer covers 90% of earnings — a percentage lawmakers expected to remain constant when they made the 1983 reforms, according to research from the Roosevelt Institute, a New York-based liberal think tank. The share of earnings covered by Social Security payroll taxes fell to around 83% in 2000 and has mostly stabilized there, according to the institute.
AARP points to an aging population as another reason for Social Security's funding challenges. The worker-to-beneficiary ratio will fall from 3.4 to 2.4 between 2000 and 2030. Falling fertility rates are also shrinking the worker-to-beneficiary ratio.
Shifting income patterns have also meant that a smaller share of U.S. GDP is subject to the Social Security payroll tax. Taxable payroll has fallen from 41% of GDP in 1983 to 34% as of 2025, a level Social Security's trustees project will remain, according to the AARP.
AARP attributes the decline to a shift from wages toward business and investment income, which generally isn't subject to payroll taxes. Automation has reduced demand for workers, and pass-through businesses allow some owners to report compensation as profits rather than wages, according to the report.
Social Security would have collected $10.8 trillion in additional funding between 1984 and 2034 if taxable payroll had stayed at 41% of GDP, according to the AARP. That figure is in inflation-adjusted 2025 dollars.
In 2026, up to $184,500 in wages are subject to the Social Security payroll tax.
Payroll taxes accounted for 91% of Social Security's revenues in 2025, according to AARP's research, while 5% came from interest income and 4% was through federal income taxes paid by high-income beneficiaries on their benefits.
To increase Social Security's revenues, lawmakers may consider changes that make high-income taxpayers contribute more to the program while sparing low- to moderate-income taxpayers, according to the AARP report.
"The fix for Social Security isn't cutting earned benefits; it's rebuilding the revenue behind them," Johnson said.
Raising the payroll tax threshold — which is incrementally adjusted each year to keep up with average wages — would not affect most workers, since just 6% of individuals had earnings at or above the cap in 2024, according to the AARP.
In 2027, the Social Security taxable maximum is set to increase to $192,300.
Bills have been introduced in Congress to raise the cap to apply to higher thresholds, such as $250,000 or $400,000, or to eliminate it altogether. Getting rid of the cap would close 67% of the 75-year funding gap if workers do not receive a benefit increase in exchange for those contributions, according to AARP research based on the Social Security Administration's assessments.
Another option: Lawmakers may also shore up the program by taxing income not currently subject to Social Security payroll taxes, according to the AARP, following an increase in business activity through pass-through entities — such as sole proprietorships, partnerships, limited liability companies and S corporations.
Lawmakers could create a new tax on investment income to help fund Social Security's trust funds. A new 12.4% tax on investment income for active S corp. officers and limited partners would close about 25% of Social Security's 75-year financing gap, according to the AARP, which cited research from Social Security's actuaries.
One option not mentioned in the AARP research is raising the payroll tax rate, which is currently 6.2% for workers and employers, or 12.4% combined. The Social Security trustees estimated that an increase in the combined rate to 16.65% beginning in January 2026 would have made the combined program solvent for the 75-year period ending in 2100.
A national survey conducted in February found 62% of individuals would support gradually increasing the payroll tax from 6.2% to 6.5%, according to the University of Maryland School of Public Policy. That poll included 2,509 adults.
The 1983 Social Security reforms included changes to benefits, such as gradually raising the retirement age from 65 to 67, delaying the cost-of-living adjustment by six months and taxing Social Security benefits.
Research shows those changes have reduced lifetime retirement benefits by about 19% for people turning 65 in 2026 compared to what they would have received under the previous rules, Jenn Jones, vice president of financial security and livable communities at the AARP, said during the Tuesday press briefing.
While the AARP has not endorsed any specific benefit changes, Jones said the organization opposes cuts to monthly checks.
"Millions of Americans — we hear from them every day — cannot afford to lose a penny," Jones said.