The President’s flagship tax and expenditure bill has no significant proposals. And that may not be a coincidence.
Social Security uncertainty and policy changes are driving more people to submit
With the huge increase in social security applications, retirees are facing financial decisions affected by law and economic concerns in today’s climate.
Scripps News
For most Americans, social security income is not a luxury. It is a fundamental part of their financial well-being. An annual survey from the National Pollster Gallup over 20 years has consistently found that 80% to 90% of retirees cover social security checks to some extent.
For the 52.6 million Americans currently receiving benefits for retired workers, there’s nothing more important than knowing how much they receive each month.
Many of these retirees have come to realize that today’s Social Security dollars are not what they were before. Due to the inherent flaws in the inflation index behind the annual cost of living adjustment (COLAS), the purchasing power of Social Security income has declined by 20% since 2010, based on a July 2024 analysis from the Senior Citizens League (TSCL). In other words, beneficiaries of retired workers are eager to announce and reform that lead to more intense payments.
On last year’s campaign trail, Donald Trump of the time announced in all capital letters about the truthful social social media platforms. Now, President Trump doubled the claim at a rather recent City Hall event, declaring:
In the coming weeks and months, we will pass on the largest tax cut in American history. That does not include taxes on tips, no tax on social security, or tax on overtime. It’s called “One, Big, Beautiful Bill.”
But there’s one problem with Trump’s “big, beautiful bill.” It completely breaks his social security promises.
Trump’s “One, Big, Beautiful Bill” doesn’t have any important proposals
The bill passed the House on Thursday, May 22nd, and is inspired by many of Donald Trump’s campaign promises to head to the Senate, calling for tax cuts, credit assortment and reductions in efficiency-based. While this is far from the complete list of everything that “one, big, beautiful bill” aims to achieve, the bill with over 1,000 pages is:
- It will permanently extend the tax cuts for individuals handed over under the Tax Reductions and Employment Act (TCJA) in 2017. A small corporate income tax rate reduction from 35% to 21% is permanent, but by December 31, 2025, individual tax cuts are currently on track.
- Increases the state and local tax (salt) deduction to $40,000 from the current $10,000 limit imposed via the TCJA. There are phase-outs of revenues of over $500,000.
- Expand annual contribution limits for low- and middle-income health savings accounts (more known as HSAs).
- Exempts eligible tips (for those earning less than $160,000) from federal income taxes through 2028.
- Low and middle-income earners age 65 and older can deduct an additional $4,000 on their federal tax returns or $8,000 for couples who file jointly.
- Eliminate federal student loan subsidies.
- It will reduce spending on Medicaid and Supplementary Nutrition Assistance Programs by approximately $1 trillion.
What is surprising lacking in this broad proposal is Trump’s pledge to remove taxes on Social Security benefits. Instead, there is a measure to add $4,000 to the standard deduction for seniors over the age of 65, or $8,000 for couples who are jointly filed. However, this additional deduction is only available to individuals and couples with adjusted gross incomes of up to $75,000 and $150,000 respectively.
Taxation on social security benefits has become an increasingly important source of income. Earnings from benefits receipt data from the US old age, survivors and disability insurance trust fund YCHARTS.
Taxes on Social Security benefits were part of the 1983 bipartisan Social Security amendment. This last major overhaul of the program also gradually increased pay taxes and full retirement age for Americans at work.
From 1984, up to 50% of Social Security benefits could be subject to federal tax rates if the provisional income (adjusted gross income + tax-free interest + half of Social Security benefits) is $25,000 for a single filer, and if a jointly filed couple exceeds $32,000, up to 50% of Social Security benefits could be subject to the federal tax rate. Ten years later, the second tax class allowed the taxation to tax benefits of up to 85% at federal tax rates if their provisional income exceeded $34,000 and $44,000 for individuals and couples who were jointly submitting, respectively.
What I hate about this tax is that these income thresholds are not adjusted for inflation after 4 and 30 years, respectively. What was once a tax that was intended for around 10% of senior households now affects about half of all retired households.
Based on “One, Big and Beautiful Bill,” this hated tax doesn’t go anywhere. In other words, the president has abolished the social security promise to remove it.
Two reasons why Trump’s efforts to remove taxes on social security benefits failed
Don’t get it wrong, Trump has broken his social security promises and has nothing to do with popularity. The overwhelming proportion of elderly people in the informal TSCL survey supported the idea of eliminating taxation of social security benefits.
The real problem for Donald Trump is that popular things are always best or not viable.
One reason the president abolished his social security promises is because of the financial implications of what he proposed. Eliminating taxes on benefits would have helped what approximately half of the beneficiaries of retired workers could sustain for several years, but would have a disastrous effect on Social Security’s financial health.
In the 2024 Social Security Council report, the trustee estimated that the Old Age and Survivor Insurance Trust Fund (OASI) would run out of assets reserves. Survivor.
OASI’s asset reserves are expected to dry out by 2033. US Old Age and Survivor Insurance Trust Fund assets are year-end data by YCHARTS.
If President Trump succeeded in removing taxes on benefits, he would have ended one of the program’s three sources of revenue and promoted a timeline against OASI’s asset reserve depletion. Additionally, there is a strong possibility that we will need to cut our profit margins to maintain payments over the next 75 years.
Another issue with Trump is that he is unlikely to win the votes he needs to remove taxes on benefits.
Amendments to the Social Security Act require 60 votes in the Senate. It’s been 46 years since either party owned a large majority of 60 seats in the Senate. In other words, all laws aimed at amending social security require bipartisan support. Since the 1983 amendment was signed to the law, Democrats and Republicans have found little common ground when revising Social Security.
Perhaps neither the 45 Senate Democrats and two independent senators voted in favor of Trump’s proposal. It is also not clear whether all 53 Republicans are riding on the president’s call to eliminate taxes on benefits. Rather than risking a potentially embarrassing defeat, this social security promise was intentionally ruled out, restraining “one, big, beautiful bill.”
Regardless of the exact reason, taxing Social Security benefits despite the proposal being shelved is a need for a social programme that, no matter how unpleasant or offensive, faces the possibility of cutting payment cuts in just eight years.
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