AARP pins Social Security's 2034 shortfall on a shrinking payroll share

The AARP Public Policy Institute found that taxable payroll — the wages and salaries that fund the program — has slipped as a slice of GDP over the past four decades. If payroll tax revenue had tracked economic growth, Social Security could cover full benefits through 2059, 25 years past the 2034 depletion date projected for its combined funds. Social Security's finances, said Richard Johnson, the institute's vice president of financial security, have weakened not simply because America has grown older, but because the economy has changed while the program's revenue system has not.

Social Security's trustees said in June that the combined retirement and disability trust funds could run dry in the third quarter of 2034, at which point only 83% of scheduled benefits would be payable without Congress acting. The retirement trust fund alone faces a fourth-quarter 2032 depletion date, when 78% of benefits would be payable. AARP anchored its analysis to the later 2034 date because lawmakers have shifted money between the funds before.

The shrinkage is mostly a story of where income goes. Taxable payroll was 41% of GDP in 1983; as of 2025 it's 34%, a level trustees expect to hold. AARP blames a shift from wages toward business and investment income — which generally escapes payroll taxes — plus automation cutting demand for workers and pass-through businesses letting owners book compensation as profit. Falling fertility rates are thinning the worker-to-beneficiary ratio too, which stood at 3.4 in 2000 and is projected to hit 2.4 by 2030. Add it up and Social Security would have collected $10.8 trillion more between 1984 and 2034 if taxable payroll had stayed at 41% of GDP, in inflation-adjusted 2025 dollars.

Payroll taxes supplied 91% of Social Security's revenue in 2025, AARP found, with 5% from interest income and 4% from federal income taxes that high earners pay on their benefits. Rising inequality means the payroll tax cap no longer covers 90% of earnings the way lawmakers assumed in 1983, according to the Roosevelt Institute, which pegs covered earnings at roughly 83% since 2000. Just 6% of individuals hit or topped the cap in 2024, per AARP. In 2026, up to $184,500 in wages is subject to the tax, and the threshold is set to reach $192,300 in 2027.

Congress has options. Bills would lift the cap to $250,000 or $400,000 — or scrap it entirely, which AARP research says would close 67% of the 75-year funding gap if workers get no benefit bump in return. A new 12.4% tax on investment income for active S corp officers and limited partners would cover about 25% of that gap, according to Social Security's actuaries. The AARP report doesn't mention raising the payroll tax rate itself, currently 6.2% for workers and employers; trustees estimated a combined rate of 16.65% starting in January 2026 would keep the program solvent through 2100. A February University of Maryland School of Public Policy survey of 2,509 adults found 62% would back a gradual payroll tax increase, testing a 6.5% rate against today's 6.2%.

AARP argues the 1983 reforms already squeezed beneficiaries: changes that raised the retirement age to 67, delayed the cost-of-living adjustment by six months and taxed benefits trimmed lifetime retirement benefits by about 19% for people turning 65 in 2026, according to Jenn Jones, the group's vice president of financial security and livable communities. She said AARP has not endorsed specific benefit changes but opposes cuts to monthly checks. Millions of Americans cannot afford to lose a penny, Jones said.