Growing U.S. Inequality Is Worsening Social Security's Financial Crunch, Group Says

CBS Bay Area

June 22, 2026

Social Security's looming funding crisis is usually blamed on demographics, with an aging U.S. population and declining birth rates leaving fewer workers to support retirees. But another force is also draining the program's finances: widening income inequality.

In the last few decades, incomes of higher-paid Americans have soared, far outpacing those of low- and middle-class workers. That's become a problem for Social Security because the program only taxes annual earnings up to $184,500, meaning it loses out on much of the faster income growth among top earners.

As a result, Social Security's revenue base is eroding, according to the program's latest trustees' report. The share of total wages subject to Social Security taxes has fallen from almost 87% in 1984 to roughly 83% today, largely because high earners' pay has grown much faster than everyone else's, lifting more of their income above the tax cap, the report found.

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