Could Donald Trump's upcoming plans accelerate the insolvency on Social Security benefits? What to know
Social Security, a program millions of Americans rely on for retirement, faces insolvency as early as Fiscal Year (FY) 2034, according to the Congressional Budget Office (CBO). Without reform, beneficiaries could see a devastating 23 percent reduction in benefits. Addressing this issue would require cutting benefits by 24 percent across the board or raising revenue by 35 percent over the next 75 years.
While outgoing Vice President Kamala Harris has pledged to “protect Social Security” and soon-to-be President Donald Trump has vowed to “fight for and protect Social Security,” neither has presented a detailed plan to tackle the looming crisis. With an average couple retiring just before insolvency facing a $16,500 annual cut, the urgency for solutions cannot be overstated.
President Trump‘s campaign has introduced several policies that, if enacted, could accelerate Social Security‘s financial woes. His proposals to eliminate taxation on Social Security benefits, end taxes on tips and overtime, impose tariffs, and expand deportations would increase Social Security’s cash deficits.
One of Trump‘s proposed solutions involves expanding oil and gas leasing revenues to fill the funding gap. The appeal of this strategy lies in its avoidance of payroll tax increases and benefit reductions. However, experts have cast doubt on its feasibility.
Even under ideal conditions, opening all U.S. federal and private lands to oil and gas extraction would generate only about $5 trillion in revenue. This figure falls far short of the $22.6 trillion needed to address the funding shortfall over 75 years. Current oil and gas leasing revenue is significantly lower, at just $20 billion in FY 2022. To eliminate the shortfall, leasing revenue would need to increase 27-fold, an unrealistic target.
Alternative strategies to stabilize Social Security
Policymakers have proposed several other options to address the funding crisis. Among the most discussed is raising or eliminating the income cap on Social Security taxes. In 2025, only the first $176,100 of earnings will be subject to these taxes. Raising this ceiling would increase contributions from high earners without affecting low- and middle-income workers.
Another option is increasing the payroll tax rate, currently set at 12.4 percent, split between employers and employees. According to the CBO, raising this rate to 16.7 percent could close the shortfall. For someone earning $60,000 annually, this would mean an additional $1,290 in taxes per year.