The Trump administration will implement “the largest tax cut in history” through a series of actions, including eliminating taxes on Social Security for seniors, White House press secretary Karoline Leavitt said on Thursday.
The move could affect millions of beneficiaries. According to the Social Security Administration (SSA), about 40 percent of Social Security beneficiaries must pay federal income taxes on their benefits.
Why It Matters
During his 2024 presidential campaign, Donald Trump promised widespread tax cuts, including exempting tips, Social Security benefits and overtime pay from income tax. The cost of these tax cuts would be offset by his proposed tariffs, he said. Economists are skeptical about the effects of these policies on the U.S. economy, and voters don’t care for them if they mean increasing the country’s debt, recent surveys show.
A January poll by the Peter G. Peterson Foundation, founded by a Nixon administration secretary of commerce, found that 78 percent of Americans didn’t want tax cuts that would increase the national debt. Another recent poll, by USA Today/Suffolk University, found that 53 percent of U.S. voters believed that Congress under Trump should focus on cutting the federal deficit, even if it meant abandoning plans for tax cuts.
What To Know
On Thursday, Leavitt told reporters “the tax priorities of the Trump administration,” which the president had laid out to GOP lawmakers during what the Associated Press called “an unusually long meeting” at the White House.
The meeting—which comes as House Republicans are rushing to produce Trump’s budget bills, including tax cuts—lasted almost five hours.
According to the White House press secretary, these are Trump’s tax priorities: “No tax on tips, which is obviously a very public campaign promise that the president made.
“No tax on seniors’ Social Security. No tax on overtime pay. Renewing President Trump’s 2017 middle-class tax cuts … Adjusting the SALT cap. Eliminate all the special tax breaks for billionaire sports team owners. Close the carried interest tax deduction loophole. Tax cuts for ‘made in America’ products.”
Leavitt added: “This will be the largest tax cut in history for middle-class, working Americans. The president is committed to working with Congress to get this done.”
It’s unclear whether all the tax cuts and policies will be implemented in the pending legislation.
Who Will Be Affected
According to data from the SSA, there were 67.5 million Social Security beneficiaries in the nation as of March 2024. Of these, 75.1 percent were retired workers, while 10.8 percent were disabled workers. Family members of deceased workers made up 8.6 percent of the total, while family members of retired or disabled workers represented 5.5 percent.
Seniors who earn less than $25,000 per year (or $32,000 for married couples) of combined income (adjusted gross income, nontaxable interest and half of their Social Security benefits) do not pay taxes on their Social Security benefits.
Based on SSA data, about 27 million beneficiaries pay income taxes on their monthly benefits. These are people who generally receive other substantial income in addition to their benefits, meaning that wealthier retirees will benefit from Trump’s proposed tax cuts.
Taxpayers filing individual tax returns may have to pay income tax on up to 50 percent of their Social Security benefits if their combined income is between $25,000 and $34,000, according to the SSA. If it is more than $34,000, beneficiaries may have to pay up to 85 percent of their Social Security checks in taxes.
These taxes represent a significant source of revenue for the program. While 95.1 percent of Social Security’s funding came from dedicated tax revenues in 2023, 3.8 percent came from the federal income taxes that some beneficiaries pay on a portion of their benefits.
Eliminating the tax on Social Security benefits would reduce revenues by about $1.8 trillion between the fiscal year 2026 and 2035, according to an estimate by the Committee for a Responsible Federal Budget.
“This includes $1.05 trillion less in revenue collection for Social Security and $750 billion less revenue for Medicare,” the committee wrote in July. “Based on data from the Congressional Budget Office (CBO), the total reduction in revenue would be $1.6 trillion, with $950 billion less revenue for Social Security and $650 billion less for Medicare.” These estimates assume benefits for non-seniors will continue to be taxed.
What People Are Saying
House Majority Leader Steve Scalise told reporters on Thursday: “We got into a lot of detail on what we need to do both for the budget and the reconciliation side. President Trump was very engaged throughout the meeting, and we are narrowing down the areas [of] differences. We spent a lot of time on a whiteboard, literally putting down different numbers so we could all be on the same page.”
House Speaker Mike Johnson told reporters on Thursday: “I think we’ll be able to make some announcements, probably by tomorrow, and we’re excited about that. The idea would be to get the budget committee working potentially as early as early next week, maybe Tuesday, for a markup for the budget resolution.”
The Committee for a Responsible Federal Budget wrote in July: “Although taxation of benefits has been a relatively modest source of revenue over the past 40 years, revenue collection is growing over time because Social Security benefits are getting larger and the thresholds for exempting benefits from taxation are not indexed to inflation.”
What Happens Next
Eliminating federal taxes on Social Security benefits might be an appealing idea for millions of retirees standing to keep more of their monthly benefits in their pockets. However, the move could further threaten the program’s sustainability.
In its 2024 report, the Committee for a Responsible Federal Budget said eliminating taxes on Social Security benefits would dramatically worsen the program’s financial health, advancing its insolvency date by more than one year. Social Security’s trust funds are projected to run dry in 2035, and beneficiaries may then see their benefits cut by 17 percent.