A Way to Help Save Social Security

Depending on who is counting, Social Security runs out of money by 2034. The most recent 2026 Trustees Report, released in June 2026, confirmed that the combined OASDI trust funds are still projected to be depleted in the third quarter of 2034, unchanged from the prior year. The retirement-only fund (OASI) faces a sharper deadline: the 2026 report placed its depletion date at the fourth quarter of 2032, one full year earlier than the 2033 estimate in last year’s report. That accelerated clock traces directly to two forces: the One Big Beautiful Bill Act, which reduced benefit-tax revenue flowing into the trust funds, and revised assumptions about immigration and birth rates. Congress identified a little-known solution to the looming shortfall when it originally listed two reasons why Social Security payments are taxed. One was to treat those payments like any other income. The second was to generate revenue that strengthens the financial solvency of the trust funds. That second rationale has never been more important.

One way to extend the lifespan of Social Security is to waive the taxes on benefit payments, an idea gaining renewed attention through the “You Earned It, You Keep It Act.” Rep. Angie Craig of Minnesota introduced the House version (H.R. 2909) in April 2025, and Sen. Ruben Gallego of Arizona followed with a Senate companion bill (S. 2716). Both chambers referred their respective bills to committee, where neither has advanced further. The legislation would eliminate all federal income taxes on Social Security benefits and, to offset the revenue loss, would apply payroll taxes to earnings above $250,000. Waiving benefit taxes reduces federal income and widens the deficit on paper. The practical appeal, though, is real relief for retirees who received only a 2.8% cost-of-living adjustment for 2026, a raise that many say does not keep pace with their real-world expenses.

The Scale of the Problem

The math behind the trust funds is substantial. Social Security paid $1.60 trillion in benefits in calendar year 2025, according to the SSA’s 2026 Annual Report to Congress. Payments to the disabled and dependents represent roughly 10% of that total. The program now covers more than 70 million beneficiaries, and the 2026 report confirms that combined trust fund reserves declined by $160 billion in 2025 alone, falling to $2.56 trillion. Costs have exceeded total income every year since 2021, and the drain has accelerated. The 2026 Trustees also lowered their long-term fertility projection from 1.9 to 1.75 children per woman, in line with CBO and Census Bureau estimates, and revised immigration assumptions downward to reflect current policy, both of which shrink the future workforce that funds the program through payroll taxes.

What Benefit Taxes Actually Raise

The federal government collects approximately $90 billion a year from taxes on Social Security benefits, with the taxable wage base rising to $184,500 in 2026. The OASDI portion accounts for at least $51 billion of that, while Medicare Hospital Insurance represents at least $35 billion. That revenue flows directly back into the trust funds, which is precisely why proposals to eliminate the tax carry a complicated trade-off: the short-term relief for retirees comes at a direct cost to the funds’ long-term stability.

What the One Big Beautiful Bill Actually Did

The One Big Beautiful Bill Act, signed into law on July 4, 2025, offered a partial answer. It created a new $6,000 deduction for seniors aged 65 and older, effective for tax years 2025 through 2028, which stacks on top of the existing standard deduction and phases out for individuals earning above $75,000 (or $150,000 for joint filers). Married couples where both spouses qualify can claim up to $12,000 combined. The law did not eliminate the underlying federal tax on Social Security benefits. The Committee for a Responsible Federal Budget estimates the new senior deduction reduces revenue from benefit taxation by roughly $30 billion per year, a reduction already factored into the worsened 2026 Trustees Report projections. It is worth noting that the Tax Policy Center estimates only about 46% of senior households who file federal returns will receive any meaningful benefit from the deduction, with gains concentrated among higher-income retirees. The 75-year actuarial deficit for the combined trust funds has deepened to 4.42% of taxable payroll, up from 3.82% in the prior year’s report, and the Trustees explicitly cited the OBBBA as a primary driver of that acceleration.

The State and Federal Picture

The effects of any broader tax change would ripple outward. At the state level, West Virginia completed its Social Security benefit tax phase-out effective January 1, 2026, capping a three-year process that deducted 35% in 2024, 65% in 2025, and 100% in 2026. Eight states still tax Social Security benefits at the state level, and lawmakers in all eight introduced bills in 2025 to limit or end that practice, though most efforts stalled. Congress, meanwhile, has documented that the share of Social Security recipients paying federal taxes will continue rising sharply through 2050 unless the income thresholds, which have not been adjusted since 1983, are modernized.

The Social Security Fairness Act, enacted in January 2025, has further complicated the picture. By repealing the Windfall Elimination Provision and Government Pension Offset, it restored fuller benefits to millions of public-sector workers. The Congressional Budget Office estimates the law will cost approximately $196 billion over 10 years, adding to the program’s already substantial shortfall. The nonpartisan Bipartisan Policy Center noted that the senators elected in November 2026 will be in office when Social Security reaches insolvency, making the upcoming election cycle a particularly consequential one for the program’s future.

The Runway a Full Repeal Could Buy

How much runway could eliminating benefit taxes actually buy? According to Social Security’s chief actuary, the You Earned It, You Keep It Act, combining tax relief with a new levy on high earners above $250,000, would push the projected combined trust fund depletion date from 2034 all the way to 2054. That projection was calculated before the OBBBA became law, so the baseline has shifted, but the structural logic remains: pairing revenue loss with an offsetting high-earner levy can extend solvency meaningfully. The political math, however, remains difficult. Raising payroll taxes on upper-income earners is contested, and eliminating benefit taxation without an offset would accelerate insolvency. The nonpartisan Congressional Budget Office independently moved its OASI depletion estimate to 2032 in a February 2026 update, matching the Trustees’ later finding and underscoring that the 2032 cliff is no longer a distant abstraction. With that deadline now fewer than six years away, the case for some combination of revenue increases and threshold adjustments has rarely been more urgent.

Critical Moves Lawmakers Must Make for Social Security’s Survival

Editor’s note: This article was updated to reflect additional context from the 2026 SSA Trustees Report, including the OASI depletion date’s one-year acceleration from the prior annual projection, the Trustees’ revised fertility and immigration assumptions, the CBO’s independent February 2026 confirmation of the 2032 depletion date, the Senate companion bill to the You Earned It, You Keep It Act introduced by Sen. Ruben Gallego, details on the OBBBA’s $12,000 deduction for married couples, the Tax Policy Center finding that only about 46% of senior tax filers benefit from that deduction, and updated context on West Virginia completing its three-year phase-out and the eight states that still tax Social Security benefits.

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