How is Social Security (OASDI) primarily funded?

Social Security, officially known as Old-Age, Survivors, and Disability Insurance (OASDI), is primarily funded through payroll taxes collected under the Federal Insurance Contributions Act (FICA). These taxes are automatically deducted from workers' paychecks and are split between the employee and employer contributions. This system ensures a steady stream of revenue specifically earmarked for Social Security benefits, making it a sustainable model to support the financial needs of retirees, disabled individuals, and survivors of deceased workers.

The payroll tax funding is relevant as it directly links the contributions made by current workers to the benefits received by future beneficiaries. Each worker's eligibility for Social Security benefits is directly tied to their work history and the amount of payroll taxes paid over the years. This creates a trust fund system that helps maintain the program's solvency by investing collected taxes in U.S. Treasury securities, which generate returns over time.

Other potential funding sources, such as income tax, sales tax, or property tax, do not specifically fund Social Security. Income taxes fund various other federal programs and benefits, sales taxes are typically used for state and local funding, and property taxes are primarily a source of revenue for local governments. Thus, payroll taxes are the correct and primary means of funding Social Security.