Trump’s Mass Deportations Could Impact Social Security Insolvency

Deportation of illegal immigrants projected to cut annual cash flow to Social Security by $20 billion
Trump mass deportations
President Donald Trump. Image credit: © Rokas Tenys | Dreamstime.com

A key item on President Trump’s agenda as he begins his second administration is securing the Southern Border, and that mass deportations of people already living in the U.S. illegally are a big part of his plan to crack down on illegal immigration.

Southern border
Image credit: © Adogslifephoto | Dreamstime.com

With goals such as enhancing national security, removing criminals in the country illegally, deterring future illegal immigration, and opening up job opportunities for legal citizens, the initiative has pluses and minuses.

One unintended consequence of the mass deportations? Further accelerating Social Security’s looming insolvency by eliminating Social Security payroll taxes paid by the illegal immigrants with every paycheck—by people who also lack the ability to ever collect Social Security benefits down the road.

The 2024 Social Security Trustees Report released last May forecast that the retirement trust fund will run dry in 2033, absent Congressional action. But some of Trump’s moves and campaign promises—to date without any offsets being provided—could accelerate that timeline.

Among them? Eliminating the tax on Social Security benefits, which, without an offset could move up the insolvency window by two years by eliminating about $950 billion between FY 2026 and 2035 from the fund’s coffers, according to the nonpartisan Committee for a Responsible Federal Budget. Other Trump campaign promises to end taxes on tips and overtime pay would also negatively impact Social Security’s finances.

And then you have The Social Security Fairness Act, which was recently signed into law by Joe Biden during the last days of his term. That controversial legislation expanded benefits for certain public servants without bringing in any new revenue, and is forecast to accelerate the depletion of the combined retirement and disability trust funds by about six months, according to the Congressional Budget Office.

But as the Trump begins his second term, the most immediate action that could impact Social Security so far surrounded closing the Southern border and ramping up action on deportations of those in the U.S. illegally.

On January 23, U.S. Immigration Customs Enforcement (ICE) began deportations in Boston, Denver, Philadelphia, Atlanta, Seattle, Miami, Washington DC, New York City, and Newark, detaining 538 undocumented immigrants, according to a post on X from White House Press Sectretary Karoline Leavitt.

The Social Security Administration recently told Business Insider that the deportations could cut annual cash flow to Social Security by $20 billion.

Undocumented immigrant tax contributions
Graphic credit: ITEP.org

According to 2024 estimates from the Center for Migration Studies of New York and other groups, as many as 8.3 million undocumented immigrants work in the U.S. economy, or 5.2% of the workforce. These people pay payroll taxes that fund Social Security and Medicare, even though they lack legitimate Social Security numbers are ineligible to eventually claim these benefits.

A 2024 study from the Institute on Taxation and Economic Policy found immigrants living in the U.S. illegally paid $25.7 billion in Social Security taxes and $6.4 billion in Medicare taxes in 2022. Only a select few of those that someday receive asylum and therefore could become eligible to qualify for benefits from those federal programs could eventually collect, but that is likely less than 10%, according to the Cato Institute.

Social Security is mainly funded through a dedicated payroll tax where employees and employers each pay 6.2% of wages with a cap on the amount of wages that are subjected to the tax.

SEE ALSO:

• Second Trump Presidency: End of Tax on Social Security Benefits?

• Social Security Insolvency Could Result in $900K Benefits Loss

• Podcast: Andrew Biggs Rips Congress for Social Security ‘Fairness’ Act

• Group Warns on ‘Cost of Doing Nothing’ About Social Security

Brian Anderson Editor
Editor-in-Chief at  | banderson@401kspecialist.com |  + posts

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.

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