WASHINGTON, DC – Recent political rhetoric has intensified the focus on the future of Social Security and federal tax policy as a critical legislative deadline approaches.

• The Solvency Clock – The combined Social Security trust funds are projected by the Congressional Budget Office (CBO) to be depleted around 2035, at which point benefits would be automatically cut by approximately 23% if no legislative action is taken.
• Diverging Policy Paths – Proposals to fix the shortfall generally fall into two categories: increasing revenue, often by raising the cap on earnings subject to payroll tax, or reducing outlays, for example by gradually raising the full retirement age.
• The Tax Cut Connection – The upcoming 2026 expiration of many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) links the two issues, as extending the cuts would add trillions to the national debt, creating a direct fiscal conflict with shoring up Social Security.

Talk of a “big beautiful bill” often serves as political shorthand, but behind the slogans are concrete policy decisions with significant consequences for millions of Americans’ retirement plans and the nation’s fiscal health.

What Is the Deadline Facing Social Security?

The core of the issue is a simple math problem. For years, the Social Security system has been paying out more in benefits than it collects in revenue, covering the difference by drawing from its trust funds. According to the latest projections from the non-partisan Congressional Budget Office, those funds are on track to be exhausted by the mid-2030s.

What happens if that deadline arrives without Congressional action? The system does not simply run out of money. It can only pay out what it collects in real-time from payroll taxes. This would trigger an immediate, across-the-board cut in benefits for all recipients, currently estimated to be around 23%. This would affect not only current retirees but also disabled workers and survivors who rely on the program. The urgency stems from the need to avoid this sudden fiscal cliff for tens of millions of people.

How Do Major Proposals Plan to Fix It?

While there are countless variations, most proposed solutions involve adjusting one of two main levers: revenue or benefits.

One approach, generally favored by Democrats, focuses on increasing revenue. The most common proposal is to raise or eliminate the cap on earnings subject to the Social Security payroll tax. In 2025, workers only pay this tax on the first $174,900 of their income. Lifting this cap would mean higher earners contribute more, significantly extending the program’s solvency. Other proposals involve a modest increase in the 12.4% payroll tax rate, split between employees and employers.

The other approach, often put forward by Republicans, centers on reducing future outlays. This typically includes proposals to gradually raise the full retirement age from 67 to 69 or 70, reflecting longer life expectancies. Another idea is to modify the annual cost-of-living adjustment (COLA) by tying it to a different inflation measure, like “chained CPI,” which typically grows more slowly and would reduce the rate of benefit increases over time.

Where Does Tax Policy Fit In?

The debate over Social Security does not exist in a vacuum. It is directly linked to broader discussions about federal spending and taxes, particularly the looming expiration of the individual tax cuts from the 2017 Tax Cuts and Jobs Act. These provisions, which lowered income tax rates for most brackets, are set to expire at the end of 2025.

According to the CBO, making these cuts permanent would add more than $3 trillion to the national debt over the next decade. This creates a fundamental policy tension. Pursuing large-scale, permanent tax cuts would significantly constrain the financial resources available to address Social Security’s shortfall. Lawmakers are therefore faced with a difficult trade-off: prioritize lower taxes, which would increase the debt and make a Social Security fix more difficult, or address the retirement system’s funding, which may require new revenue or unpopular benefit changes. The path chosen will define U.S. fiscal policy for years to come.