Amid growing concern over Social Security payments<\/a> falling by as much as 22 percent<\/a> when a key funding source runs dry in 2032, the tax cut, which is included in Donald Trump\u2019s One Big Beautiful Bill Act, is on track to contribute to the system\u2019s shortage<\/a>. <\/p>\n The tax deduction it provides on Social Security income<\/a> from 2025 to 2028 would cost an estimated $91 billion in tax revenue for the system, according to financial think tank Peter G. Peterson Foundation.<\/p>\n \u201cPolicymakers adopted a broader approach in the form of a new senior deduction that is projected to cost $90.8 billion over four years, contributing to OBBBA\u2019s total deficit increase of $4.1 trillion over ten years, including interest costs,\u201d financial think tank Peter G Peterson Foundation wrote in a January analysis<\/a>.<\/p>\n The deduction – which reduces a retiree\u2019s taxable income – is $6,000 for single filers<\/a> age 65 and older, and $12,000 for married couples aged 65 and older<\/a>, according to the IRS.<\/p>\n While the tax cut benefits retirees for the four years in which they can claim it, reduced tax payments add nearly $100 billion to a payment system struggling to maintain funding. <\/p>\n The Social Security system relies on income from three places to pay out benefits to retirees and their spouses: payroll taxes, two trust funds and taxes on Social Security payments<\/p>\n Taxes on payroll and Social Security payments flow into two trust funds – Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI). <\/p>\n The government uses some of the money to pay out benefits and administrative fees, then invests the rest to earn interest and boost the funds\u2019 balances. <\/p>\n As the workforce has become older and the gap between the number of workers and retirees has shrunk from 5-to-1 when the Social Security program started to 2.9-to-1<\/a> in 2026, according to think tank Bipartisan Policy Center (BPC). <\/p>\n The strain is burning through the OASI\u2019s cash faster than it can be replenished.<\/p>\n Because of that, the Social Security Board of Trustees predicts<\/a> that the OASI trust fund will run out in 2032, leading to benefit payments that could be as much as 22 percent lower than they should be. <\/p>\n Solutions for the shortfall range from adjusting benefit amounts and tax limits, as the BPC suggests, to capping the maximum yearly benefit a retiree can receive at $100,000, a flat employer tax rate that would apply to all incomes instead of stopping at the current limit of $184,500, or limiting Social Security\u2019s yearly cost-of-living increases for those who receive the most benefits, according to nonpartisan think tank Committee for a Responsible Federal Budget.<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"Your support helps us to tell the story From reproductive rights to climate change to Big Tech, The…\n","protected":false},"author":2,"featured_media":858852,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[64,63,99,186,184,185],"class_list":["post-858851","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-au","tag-australia","tag-business","tag-finance","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/858851","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=858851"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/858851\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/858852"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=858851"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=858851"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=858851"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"Tax](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/08\/GettyImages-2225655723.jpg\")
Tax cuts meant to save Social Security recipients money from 2025 to 2028 could end up adding to a revenue shortfall that\u2019s on pace to lower Social Security payments by up to 22 percent in 2032 (Getty)<\/p>\n![\"A](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/08\/GettyImages-2206443388.jpg\")
A shrinking gap between the number of workers and retirees in the United States has led to a funding crisis that will result in lower payments in six years if lawmakers don\u2019t take action (AFP\/Getty)<\/p>\n