Donald Trump’s promise to eliminate taxes on Social Security payments has become a centerpiece of his campaign, drawing significant support from seniors who stand to benefit from the plan. The proposal, which Trump first shared in July via his social media platform Truth Social, pledges to end all taxes on Social Security income, declaring that “SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!” While the plan is popular with voters, experts warn it could have serious long-term consequences for the future of Social Security benefits.
Currently, about 40% of Social Security recipients pay federal income taxes on their benefits, depending on their income level. Single filers earning between $25,000 and $34,000 pay taxes on up to 50% of their benefits, while those making more than $34,000 are taxed on up to 85%. Couples filing jointly face similar tax rules with thresholds adjusted for joint income. These taxes are not simply absorbed into the general federal budget; instead, they play a vital role in funding the Social Security and Medicare systems. Revenue from Social Security taxes is directed toward the Social Security Old-Age, Survivors, and Disability Insurance (OASDI) trust fund, as well as the Medicare Hospital Insurance (HI) trust fund.
Trump’s plan would eliminate this revenue stream without offering a clear plan to replace the lost funds. Experts are raising alarms about what this could mean for the solvency of Social Security. The Social Security Administration (SSA) has already projected that its trust funds could be fully depleted by 2034 if no changes are made to current funding. In such a scenario, benefits would be automatically reduced by about 20%. Eliminating taxes on Social Security benefits could hasten that depletion by reducing one of the critical sources of revenue for these trust funds.
According to estimates from the Committee for a Responsible Federal Budget (CRFB), eliminating taxes on Social Security payments would increase the federal deficit by $1.6 trillion to $1.8 trillion by 2035. The CRFB’s analysis also suggests that this change could move up the insolvency date of Social Security’s retirement trust fund by more than a year. The Tax Foundation, a nonpartisan think tank, has similarly criticized the plan as fiscally irresponsible, estimating that it could cause the trust funds to run out two years earlier than currently projected, in 2033.
The immediate effect of eliminating these taxes would be a slight boost to after-tax income for retirees who fall above the income thresholds. The Tax Foundation predicts retirees would see an increase of up to 1.1% in their after-tax income, with an average increase of about 0.6%. However, lower-income retirees—who are already exempt from paying taxes on their Social Security benefits—would not see any significant change.
Despite its short-term popularity, critics argue that Trump’s proposal fails to address the underlying issues facing Social Security. With the program’s financial stability already in question, removing a key source of funding could push it to insolvency even sooner, resulting in benefit cuts for millions of Americans. Experts agree that while it may sound appealing to eliminate taxes on Social Security benefits, doing so without a plan to recoup lost revenue could lead to deeper financial problems for the program and, ultimately, for the beneficiaries who rely on it.
As the 2024 election approaches, Trump’s proposal to eliminate Social Security taxes is likely to remain a focal point of his campaign. However, without a clear solution to the financial challenges this plan would create, many experts are concerned that the long-term risks may outweigh the short-term gains for retirees.
