The Social Security program paid more than $113 billion in benefits to 66 million Americans in May, and total outlays for the year are expected to reach $1.3 trillion. That makes Social Security the largest line item in the federal budget. Unfortunately, the aging population has created a problem: Costs are rising faster than income.

Social Security operated at a $22 billion loss last year, marking its second consecutive annual deficit, and the program will continue to burn money indefinitely unless changes are made. That puts the Social Security trust fund on pace for depletion by 2033, according to the latest report from the Board of Trustees. If that happens, income from payroll taxes would cover 80% of scheduled benefits in 2033, and that figure would fall to 74% by 2097.

Ultimately, the Social Security program faces a funding shortfall of $22.4 trillion over the next 75 years, and many politicians argue that income inequality bears some of the blame for that problem. But President Joe Biden wants to address income inequality by applying the payroll tax to more earnings. That solution could eliminate a sizable chunk of the long-term funding deficit.

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Source Fool.com