Social Security’s financial challenges are well‑documented, but two recent policy changes have quietly made the program’s long‑term outlook even more difficult. While each was enacted with specific goals in mind, both either reduce revenue or increase costs at a time when the program is already projected to face insolvency by 2032, which would prompt an automatic 28 percent reduction in benefits absent other policy changes.
1. OBBBA’s Senior Tax Cuts Reduced Revenue for Social Security
The One Big Beautiful Bill Act (OBBBA) made sweeping changes to the federal tax code. Of particular relevance for Social Security beneficiaries, tax filers aged 65 and older are eligible for an additional deduction of $6,000 for single filers and $12,000 for married filers. This significantly reduces the number of seniors who owe taxes on their Social Security benefits and lowers the marginal tax rate applied to those benefits.
The portion of Social Security benefits that are taxed are a funding source for both the Social Security trust fund and the Medicare Hospital Insurance trust fund. According to the Committee for a Responsible Federal Budget (CRFB), these OBBBA tax changes would reduce the taxation of Social Security benefits by roughly $30 billion per year. That revenue loss is enough to move up the insolvency date of the Social Security Old-Age Survivor’s Insurance (OASI) trust fund from early 2033 to late 2032, and to accelerate the Medicare Hospital Insurance (H)I trust fund’s insolvency from late 2033 to mid‑2032.
In the most recent 10-year budget baseline, released in February 2026, the Congressional Budget Office (CBO) estimates that if Social Security benefits could only be paid from incoming revenue, after accounting for reduced income‑tax collections on benefits, annual benefits would have to be cut by about 28% once the trust fund is exhausted.
2. The Social Security Fairness Act Expanded Benefits and Increased Long‑Term Obligations
The bipartisan Social Security Fairness Act eliminated the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), two long‑standing rules designed to correct distortions created by Social Security’s progressive benefit formula.
WEP was enacted because Social Security replaces a larger share of earnings for low‑wage workers. For people who spent most of their careers in “non‑covered” jobs, such as teachers or police officers in certain states, Social Security’s records showed many years of zero earnings. The formula treated them as low‑income workers even if they had high lifetime earnings and a generous public pension. This created a “windfall” that workers who paid into Social Security for their full careers did not receive. WEP attempted to correct this by reducing the first tier of benefits, but it was widely criticized as a blunt tool that cut benefits too steeply and did not accurately reflect a worker’s true earnings history.
The GPO addressed a similar issue for spousal and survivor benefits. Before its enactment, government employees with non‑covered pensions could receive their full pension plus a full Social Security spousal benefit. The GPO reduced that spousal benefit by two‑thirds of the pension amount. While intended to prevent double benefits, the formula often eliminated the spousal benefit entirely and was viewed as arbitrary and unfair.
Fully repealing WEP and GPO removes these long‑standing guardrails and allows some workers to receive both full public pensions and full Social Security benefits. According to the CRFB, this increases Social Security’s costs by roughly $200 billion over ten years, widening the program’s funding gap and accelerating trust‑fund depletion.
There were alternative reform options that could have fixed the inequities in WEP and GPO without the high cost of full elimination. Instead, repeal increases benefit payments without adding new revenue, making Social Security’s long‑term shortfall more difficult to address.
Why These Changes Matter Now
Both policies, reduced revenue from OBBBA and expanded benefits under the Social Security Fairness Act, moved Social Security in the wrong fiscal direction. The program already faces a projected 28% across‑the‑board benefit cut once the trust fund is depleted in 2032 unless Congress acts. Adding new costs and reducing revenue only makes the eventual policy choices harder.
These changes also highlight a broader pattern: even as lawmakers acknowledge Social Security’s looming shortfall, new legislation continues to chip away at the program’s financial foundation. Without a comprehensive reform plan, incremental decisions like these compound the long‑term problem.
