In an all-caps, single-sentence post on Truth Social Wednesday, former President Donald Trump called for a move that could help some seniors on Social Security, but could also further jeopardize the long-term solvency of the program.
“SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!” was what the 45th President and current Republican presidential nominee posted to his social media platform Wednesday, without further explanation.
The post is being widely viewed as an effort to garner favor with senior voters, but was also quick to bring pushback from some economists concerned about what this potential significant change would mean for the program in the long term.
“I believe this is merely a tactic to gain votes for the upcoming election, but the idea is formidable,” Kevin Thompson, a finance expert and the founder and CEO of 9i Capital Group, told Newsweek in an article posted July 31. “The implications would be dire. You don’t need to be a math whiz to understand that reducing the inflow of funds into a system already projected to face insolvency within a decade is problematic.”
According to the latest Social Security Board of Trustees annual report released in early May, the Social Security trust fund will become depleted in 2033 absent congressional action—at which time only 79% of scheduled benefits would be payable.
“The idea may make a great political rallying cry, but it actually does not make good policy,” wrote Forbes contributor Andrew Leahey, a tax and technology attorney, professor and podcaster, in a July 31 response to Trump’s Truth Social post. “The idea undermines the financial integrity of both Social Security and Medicare and will, in fact, disproportionately benefit higher-income individuals, directly contravening the program’s current progressively.”
Currently, Social Security beneficiaries with incomes below $25,000 individually are exempt from Social Security taxes entirely. Individuals with total income between $25,000 and $34,000 or couples filing jointly with combined total incomes from $32,000 to $44,000 may have to pay income tax on up to 50% of their Social Security benefits, while individuals with total income of more than $34,000 or couples filing jointly more than $44,000 may see up to 85% of their benefits taxed.
The net result, Leahey wrote, is that about half of Social Security recipients pay no taxes on their benefits whatsoever—while higher-income beneficiaries pay what he called a “fairer share.”
He said proceeds from taxing Social Security benefits play a crucial role in bolstering the financial stability of both Social Security and Medicare as they are credited directly to funds earmarked for both.
“The elimination of the tax would cost nearly $1 trillion over the next decade—a shortfall that will need to be made up somewhere,” Leahey wrote.
Supporters say it’s double taxation
People against taxes on Social Security benefits say beneficiaries were already taxed on their salaries and then a portion was taxed again via income taxes.
Ending the tax on Social Security benefits is an idea that has caught the attention of lawmakers on both sides of the aisle.
Back in January, Rep. Angie Craig (D-MN) reintroduced the You Earned It, You Keep It Act, which, if passed, would eliminate all federal taxes on Social Security benefits beginning in 2025. The bill would be paid for by raising the cap on the Social Security payroll tax, so higher-earning Americans (individuals earning more than $250,000 annually) continue paying into Social Security—an idea Republicans have opposed.
“This bill is a win-win—it’s a tax cut for seniors and a way to ensure more Americans can depend on the Social Security benefits they’ve earned. And on top of that, it’s fiscally responsible,” Craig said at the time. “I’m leading the charge on this issue in Congress because we need to get money back in the pockets of middle-class Americans.”
Rep. Thomas Massie (R-KY) has long championed the idea of ending the tax. He has introduced the Senior Citizens Tax Elimination Act each Congress since taking office in 2012. The bill was originally introduced in 2003 by Representative Ron Paul (R-TX).
“Although seniors have already paid tax on their Social Security contributions via the payroll tax, they are still required to list these benefits as taxable income on their tax returns,” Rep. Massie said when the bill was reintroduced in May 2023. “This is simply a way for Congress to obtain more revenue for the federal government at the expense of seniors who have already paid into Social Security. My bill would exempt Social Security retirement benefits from taxation and boost the retirement income of millions of older Americans.”
Massie’s bill would end the tax, but calls for funds from the Treasury to be transferred to Social Security to make up for the lost revenue.
According to a blog post released July 31 in response to Trump’s Truth Social post on eliminating the tax, the Committee for a Responsible Federal Budget said that without a replacement source of revenue, doing so would add $1.6 trillion to $1.8 trillion to the deficit through 2035.
It would also increase Social Security’s 75-year shortfall by 25% and advance the insolvency date of Social Security’s retirement trust fund by over one year.
“This year, for example, taxation of benefits is projected to raise about $94 billion,” CRFB said in its blog. “Based on data from the Social Security and Medicare Trustees, we estimate that eliminating taxation of Social Security benefits for seniors would cut taxes and thus reduce revenues by about $1.8 trillion between Fiscal Year (FY) 2026 and 2035.”
Stephen Moore, a co-founder of Unleash Prosperity and a senior economic advisor to the Trump campaign, expressed support for ending the Social Security tax July 31 on Fox Business.
“Taxing these benefits reduces the incomes of seniors but also makes no sense economically,” Moore said.
He noted that the government takes 12.6% of each worker’s paycheck through a payroll tax for Social Security, and then “pays a small benefit worth less than half of what workers paid in (plus a fair rate of return) when the worker retires. The average benefit is around $2,000 a month—loosely dependent on how much that person paid in and how much they worked,” Moore said.
“By the way: who can live on $2,000 a month? This is why, in addition to this new Trump plan, the most critical and urgent reform of Social Security is to immediately allow young workers the option of putting the 12% tax into a 401(k) plan that earns a rate of return and that they own,” Moore said. “Young workers would get three times the benefit they are scheduled to get when they retire.”
He concluded by saying that when it comes to tax policy, working seniors often pay the heaviest toll. “Ending Social Security benefit taxes is a smart policy proposal and (even smarter politically given the importance of the elderly vote). Congratulations to Trump for once again being one step ahead of the Democrats.”
While the issue of Social Security hasn’t been a center of attention on the campaign trail to date, Americans have strongly and repeatedly voiced support for making reforms sooner rather than later in recent surveys.
In its annual Social Security survey released this week, Nationwide Retirement Solutions found 69% responding that a candidate’s stance on Social Security will impact who they end up voting for in November. And a survey from the National Institute on Retirement Security (NIRS) this month found that 87% of respondents believe Congress should prioritize funding Social Security benefits now instead of waiting until its predicted insolvency in 2033.
Other reports this year from nonprofit Transamerica Center for Retirement Studies and the Peter G. Peterson Foundation also saw respondents calling for improvements to the benefit.
SEE ALSO:
• 2 Ways a Harris Presidency Could Impact Social Security
• Consumers Demand Changes in Social Security
• Democrat Bill Resurfaces to Eliminate Federal Taxes on Social Security
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
