President Donald Trump's One, Big, Beautiful Bill Breaks a Key Social Security Promise

For most Americans, Social Security income isn't a luxury -- it's a foundational part of their financial well-being. More than two decades of annual surveys from national pollster Gallup have consistently found that between 80% and 90% of retirees lean on their Social Security check, to some degree, to cover their expenses.

For the 52.6 million Americans currently receiving a retired-worker benefit, nothing is more important than knowing how much they'll receive monthly.

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Many of these retirees have come to realize that a Social Security dollar today isn't what it used to be. Due to inherent flaws in the inflationary index behind annual cost-of-living adjustments (COLAs), the purchasing power of Social Security income has declined by 20% since 2010, based on a July 2024 analysis from nonpartisan senior advocacy group The Senior Citizens League (TSCL). In other words, retired-worker beneficiaries are eager for announcements and/or reforms that would lead to a beefier payout.

President Donald Trump speaking with the South African president. Image source: Official White House Photo by Daniel Torok.

While on the campaign trail last year, then-candidate Donald Trump announced in all-capital letters on his social media platform Truth Social, "Seniors should not pay tax on Social Security." Now-President Trump doubled down on this claim in a fairly recent town hall event, proclaiming:

In the coming weeks and months, we will pass the largest tax cuts in American history -- and that will include no tax on tips, no tax on Social Security, and no tax on overtime. It's called The One, Big, Beautiful Bill.

But there's just one problem with Trump's One, Big, Beautiful Bill -- it completely breaks his Social Security promise.

Trump's One, Big, Beautiful Bill is missing a key proposal

The bill inspired by many of Donald Trump's campaign promises, which passed the House on Thursday, May 22 and is headed to the Senate, calls for an assortment of tax cuts and credits, as well as efficiency-based reductions. While this is far from a complete list of everything The One, Big, Beautiful Bill aims to accomplish, the greater-than-1,000-page bill would:

• Permanently extend the personal tax cuts passed in the Tax Cuts and Jobs Act (TCJA) in 2017. While the peak marginal corporate income tax rate reduction from 35% to 21% is permanent, the personal tax cuts are currently on track to sunset by Dec. 31, 2025.
• Increase the deduction for state and local taxes (SALT) to $40,000 from the current limit of $10,000 that was imposed via the TCJA. Phase-outs exist for incomes over $500,000.
• Expand annual contribution limits for Health Savings Accounts (better known as HSAs) for low and middle earners.
• Exempt qualified tips (for those earning less than $160,000) from federal income tax through 2028.
• Allow low and middle earners aged 65 and above to deduct an additional $4,000 on their federal tax return, or $8,000 for couples filing jointly.
• Eliminate subsidies on federal student loans.
• Reduce spending on Medicaid and the Supplemental Nutrition Assistance Program by roughly $1 trillion.

What's surprisingly missing in this extensive proposal is Trump's pledge to remove the tax on Social Security benefits. In its stead is a measure that would add $4,000 to the standard deduction for seniors aged 65 and older, or $8,000 for couples filing jointly. However, this additional deduction is only available to individuals and couples with respective modified adjusted gross incomes up to $75,000 and $150,000.

Taxing Social Security benefits has become an increasingly important source of income. US Old-Age, Survivors, and Disability Insurance Trust Fund Income from Taxation of Benefits Receipts data by YCharts.

The tax on Social Security benefits was part of the bipartisan Social Security Amendments of 1983. This last major overhaul of the program also gradually increased the payroll tax and full retirement age for working Americans.

Starting in 1984, up to 50% of Social Security benefits could be subjected to the federal tax rate if provisional income (adjusted gross income + tax-free interest + one-half of Social Security benefits) exceeded $25,000 for single filers and $32,000 for couples filing jointly. A decade later, a second tax tier allowed up to 85% of benefits to be taxed at the federal rate when provisional income surpassed $34,000 and $44,000 for individuals and couples filing jointly, respectively.

What makes this tax so hated is that these income thresholds haven't once been adjusted for inflation after four and three respective decades. What was once a tax aimed at roughly 10% of senior households now impacts about half of all retiree households.

Based on The One, Big, Beautiful Bill, this disliked tax isn't going anywhere, which means the president has reneged on his Social Security promise to remove it.

Image source: Getty Images.

Two reasons Trump's efforts to remove the tax on Social Security benefits have been unsuccessful

Make no mistake about it, Trump breaking his Social Security promise has nothing to do with popularity. An overwhelming percentage of seniors in an informal TSCL survey favored the idea of eliminating the taxation of Social Security benefits.

The real issue for Donald Trump is that what's popular isn't always what's best, or feasible.

One reason the president may have reneged on his Social Security promise is because of the financial implications of what he proposed. Although eliminating the tax on benefits would have boosted what around half of retired-worker beneficiaries would get to keep for a few years, it would have had disastrous effects on Social Security's financial health.

In the 2024 Social Security Board of Trustees Report, the Trustees estimated the Old-Age and Survivors Insurance Trust Fund (OASI) would exhaust its asset reserves -- i.e., the excess income built up since inception that's currently invested in interest-bearing government bonds -- by 2033. Though asset reserves aren't required for the OASI's solvency, the depletion of these reserves would necessitate sweeping benefit cuts of up to 21% for retired workers and survivors.

The OASI's asset reserves are forecast to run dry by 2033. US Old-Age and Survivors Insurance Trust Fund Assets at End of Year data by YCharts.

If President Trump had been successful in removing the tax on benefits, it would have ended one of the program's three sources of income and expedited the timeline to the OASI's asset reserve depletion. Further, there's a strong likelihood it would also increase the percentage benefits would need to be cut to sustain payouts over the next 75 years.

The other issue for Trump is that it's unlikely he would have the necessary votes to remove the tax on benefits.

Amending the Social Security Act requires 60 votes in the Senate. It's been 46 years since either party held a supermajority of 60 seats in the upper house, which means all legislation aimed at amending Social Security requires bipartisan support. Democrats and Republicans have found little common ground when amending Social Security since the Amendments of 1983 were signed into law.

More than likely, none of the 45 Democrats and two Independent senators in the upper house would vote in favor of Trump's proposal. It's also not clear if all 53 Republicans would be on board with the president's call to eliminate the tax on benefits. Rather than risk a potentially embarrassing defeat or holding up The One, Big, Beautiful Bill, this Social Security promise was (likely) purposely left out.

Regardless of the precise reason this proposal was shelved, taxing Social Security benefits, no matter how disliked or unpleasant, is a necessity for a social program facing the possibility of sweeping payout cuts in just eight years.

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