Recent Tax Bill Will Have ‘Material Effects’ On Social Security’s Financial Status

A new analysis from the Social Security Administration’s Office of the Chief Actuary warned that the recently enacted “One Big Beautiful Bill Act” will worsen the already existing challenges facing Social Security’s trust funds, accelerating their projected depletion by several months and deepening the programs’ financial woes.

The analysis stated that because the funds rely on revenue from income taxes paid on Social Security benefits, the bill will have “material effects on the financial status of the Social Security trust funds.”

In the August 5 letter to Senator Ron Wyden, D-Oregon, Social Security Administration Chief Actuary Karen Glenn shared an estimate that President Donald Trump’s key tax and spending legislation will result in a net increase of $168.6 billion in Social Security program costs over the next decade.

The law, signed on July 4, makes permanent the lower income tax rates first enacted under the 2017 Tax Cuts and Jobs Act and temporarily (through 2028) increases the standard deduction for senior citizens, to enable them to not pay taxes on the Social Security benefits they collect.

Because Social Security receives revenue from the taxation of benefits—tied to beneficiaries’ overall income—the lower tax revenues generated as a result of the bill mean less money flowing into the trust funds.

As a result, the combined Old-Age and Survivors Insurance and Disability Insurance Trust Fund depletion dates have moved up to the first quarter of 2034 from the third quarter. The OASI fund alone is now projected to run out in the fourth quarter of 2032, three months earlier than previously expected.

Depletion means the program would only be able to pay approximately 81% of scheduled benefits using the incoming tax revenue from workers. Congress has not addressed whether it would cut benefits or provide additional funds at that time.

In the new analysis Glenn provided, the SSA estimated that the 75-year actuarial deficit for Social Security has grown worse—increasing to 3.98% of taxable payroll from 3.82%.

“The net effect of the changes in the law will decrease annual balances for the OASDI program from 2025 through the end of the 75-year projection period, decreasing the annual balance for the 75th projection year (2099) by 0.17 percent of taxable payroll,” Glenn wrote.

Wyden, the top Democrat on the Senate Committee on Finance, requested the analysis having voted against the OBBBA.

“While I was not supportive of this legislation, I would like to be aware of its implications on the Social Security Trust Funds,” Wyden wrote in his inquiry on July 30.

The bill was passed using reconciliation, a procedure meant to expedite the passage of certain federal budget legislation in the Senate by requiring a simple majority vote to pass, rather than a 60-vote supermajority. Each of the 47 elected Democrats in the Senate voted against the bill, along with three Republican senators, but Vice President JD Vance’s tiebreaking vote allowed the bill to pass.

The SSA Actuary’s Office emphasized that its analysis is limited to tax provisions with clear impacts on Social Security revenue. Other elements of the OBBBA, such as health care or spending changes, were not considered.

The results of the analysis will be used as a new baseline for future solvency-related proposals until the 2026 Trustees Report is released, the letter stated.