EXCLUSIVE: Social Security reform imperative to avoid 34% tax hike, insolvency by 2032

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(The Center Square) – Policymakers must return Social Security to its original intent in order to avoid massive tax hikes and insolvency, especially in light of a nation burdened by debt, a memo released by a nonprofit on the 2026 Social Security Trustees Report states.

Senior Research Fellow at Advancing American Freedom Foundation – the organization that released the memo – Rachel Greszler told The Center Square: “Social Security is running out of time and money, with automatic benefit cuts averaging $5,300 per year on track to begin in 2032.”

“Unless policymakers act, America’s favorite entitlement program will become its most disgraced,” Greszler said.

Advancing American Freedom Foundation (AAFF) is a nonprofit and collection of “leaders from Capitol Hill, think tanks, and grassroots movements” who work together to “defend liberty and advance policies that build a stronger America,” according to its website.

According to AAFF’s memo, the 2026 Social Security Trustees report showed that “Social Security’s trust fund will be insolvent in 2032, before anyone from Generation X or younger receives a single full benefit.”

Additionally, benefit cuts will soon be a factor, with “the law currently [requiring] a 22 percent benefit cut in 2032, rising to 38 percent in 2100,” the memo said.

“Maintaining current benefits would require an immediate 34 percent Social Security tax hike,” the memo said.

“Social Security’s $29.3 trillion shortfall amounts to $215,000 per household,” the memo explained, adding that “the present value of Social Security’s 75-year unfunded obligations … equals $29.3 trillion or $215,000 per household.”

“That is up by $4.2 trillion, or an extra $29,000 per household since just last year,” the memo said.

Unfunded obligations are “essentially the difference between scheduled and payable benefits over the next 75 years.”

The memo noted that “Social Security has expanded far beyond its original intent” of protecting “older Americans from outliving their savings and to protect younger generations from having to pay for welfare for impoverished elderly people.”

The Great Depression-era program “started out as a 2% tax” and originally promised “to never take more than 6% of workers’ paychecks.”

“Today it takes 12.4% and in 2034, it would require 17.3% of workers’ paychecks to maintain current benefits,” the memo explained.

“The combination of benefit increases, program expansion, and increasing life expectancies have caused Social Security’s costs to explode,” the memo said.

Two other problems the Social Security program runs into are “unsustainable debt and declining fertility,” which “will make it increasingly difficult to maintain scheduled benefits,” the memo said.

“Social Security's insolvency in 2032 could coincide with the federal government running out of fiscal space, entering a debt spiral, and losing the ability to borrow at reasonable interest rates,” the memo said. “If that happens, it will be too late for policymakers to enact measured Social Security reforms that minimize benefit cuts.”

The memo stated that “the longer that policymakers wait to address Social Security’s long-standing shortfalls, the greater the consequences.”

The solution AAFF offers in its memo to the Social Security issues facing the nation is “gradually shifting Social Security back to its original [intent] of poverty prevention in old age.”

AAFF says that this action “would strengthen economic growth by increasing saving, investment, and labor-force participation.”

“Social Security’s $29.3 trillion shortfall ($215,000 per household) won’t fix itself,” the memo said.

“Lawmakers can either allow automatic 22 percent benefit cuts in 2032 or enact gradual, targeted reforms now to protect lower- and middle-income retirees, strengthen the economy, and demonstrate fiscal fortitude before markets force abrupt action,” the memo said.