CBO Says $120 Billion in Benefit Taxes Helps Delay Social Security Shortfall to 2032
Updated
Updated · FEDweek · Oct 7
CBO Says $120 Billion in Benefit Taxes Helps Delay Social Security Shortfall to 2032
3 articles · Updated · FEDweek · Oct 7
Summary
$120 billion in taxes on Social Security benefits is projected for 2026, with most of that revenue flowing back to Social Security and Medicare as the main retirement trust fund nears exhaustion in 2032.
CBO said those taxes have become more important because income thresholds have been largely unchanged since 1994, lifting the tax burden from 2% of benefits then to 7.1% today.
$66 billion this year will go to the old-age and survivors fund and $2 billion to disability insurance, while benefit-tax revenue is projected to reach $212 billion by 2036 and nearly $1.8 trillion cumulatively.
Without benefit-tax revenue from fiscal 2026 onward, CBO said the main Social Security fund would run out in 2031—about a year earlier—and Medicare's hospital fund would be exhausted roughly nine years sooner.
The report lands as some lawmakers still push to cut or soften benefit taxation, even after a 2025 law only reduced revenue indirectly through a larger senior deduction that expires at end-2028.