In April, more than 52 million retired-worker beneficiaries brought home an average Social Security check totaling just shy of $2,000. Though this is a relatively modest monthly payout, a majority of retirees need it, in some capacity, to cover their expenses.
For 23 consecutive years, pollster Gallup has been surveying retirees to determine how much they rely on their Social Security income. Consistently between 80% and 90% of respondents told Gallup that it was a "major" or "minor" income source. In other words, up to 9 out of 10 retirees would potentially be challenged to make ends meet if Social Security didn't exist.
For the program's tens of millions of beneficiaries, nothing is more important than knowing how much they'll receive each month and seeing this payout increase over time via cost-of-living adjustments (COLAs) to keep pace with inflation.
President Trump signing a bill in the Oval Office. Image source: Official White House Photo by Shealah Craighead, courtesy of the National Archives.
While on the campaign trail, as well as following his January inauguration, President Donald Trump outlined a highly popular proposal that would have given roughly half of all Social Security beneficiaries a raise. However, the flagship tax and spending bill for Trump's second term, known as the One, Big, Beautiful Bill, is missing this key promise -- and there's likely a good reason why.
Trump's One, Big, Beautiful Bill reneges on a key Social Security promise
Trump's One, Big, Beautiful Bill is lengthy (more than 1,000 pages) and targets a number of his campaign promises. While this is far from an extensive list, this tax and spending bill, as introduced in the House of Representatives, would:
- Permanently extend the individual tax cuts enacted by Trump's Tax Cuts and Jobs Act, which was signed into law in December 2017. These individual tax cuts will sunset on Dec. 31, 2025, unless extended.
- Increase the state and local tax (aka, SALT) deduction to $40,000 for taxpayers earning less than $500,000. The SALT deduction is currently capped at $10,000.
- Introduce a four-year (2025-2028) tax exemption on overtime pay and tips, up to specific income thresholds for individual taxpayers and couples filing jointly.
- Expand annual contribution limits for Health Savings Accounts (HSAs) for select low and middle earners.
- Authorize low and middle earners aged 65 and up to deduct an additional $4,000 on their federal tax return if filing individually, or $8,000 for couples filing jointly.
While this bill does offer a potential financial perk for select seniors aged 65 and above in the form of a higher annual deduction on their federal tax return, what it's missing is President Trump's pledge to eliminate the tax on Social Security benefits.
Taxing benefits has become a meaningful source of income for Social Security. US Old-Age, Survivors, and Disability Insurance Trust Fund Income from Taxation of Benefits Receipts data by YCharts.
On July 31, then-candidate Trump posted on social media platform Truth Social that "Seniors should not pay tax on Social Security." He followed this proposal up months after his inauguration by again stating that seniors shouldn't pay tax on their Social Security income during a town hall event.
The taxation of benefits began more than four decades ago with the passage of the Social Security Amendments of 1983. This last major bipartisan overhaul of America's leading retirement program gradually increased the payroll tax rate and full retirement age for workers, as well as introduced the now-despised tax on benefits.
Beginning in 1984, up to 50% of benefits could be subject to the federal tax rate if provisional income -- defined as adjusted gross income + tax-free interest + one-half of Social Security benefits -- exceeds $25,000 for single filers and $32,000 for jointly filing couples. A decade later, a second tier was added that allowed up to 85% of Social Security income to be exposed to the federal tax rate if provisional income tops $34,000 and $44,000 for individuals and couples, respectively.
Aside from the misconception that this is a form of double taxation, the primary reason the tax on benefits is so disliked is because none of these provisional income thresholds have once been adjusted for inflation. What was once a law aimed at roughly 10% of the highest-earning senior households now impacts around half of all senior households.
Image source: Getty Images.
Donald Trump likely broke his Social Security promise for a very good reason
One thing that can be said with relative certainty is that leaving the "no tax on benefits" clause out of the One, Big, Beautiful Bill had nothing to do with popularity. An informal survey conducted by nonpartisan senior advocacy group The Senior Citizens League showed that well over 90% of respondents didn't believe Social Security income should be taxed. The prospect of increasing what roughly half of all beneficiaries get to keep (vis-à-vis no longer paying federal tax on a portion of what they receive from Social Security) is something retirees would overwhelmingly support.
But there is one financially sound reason Trump chose to break this popular promise and leave "no tax on Social Security" out of the One, Big, Beautiful Bill: It would have substantially worsened the program's long-term outlook.
If the tax on benefits were eliminated, it would temporarily increase the take-home income for the highest-earning Social Security beneficiaries. But at the same time, it would remove one of the program's three sources of income.
According to the 2024 Social Security Board of Trustees Report, approximately $1.35 trillion was collected by the program in 2023. More than 91% of this income derived from the 12.4% payroll tax on earned income. In 2025, all wages and salary up to $176,100 is subject to this tax.
The remainder can be traced to the interest income earned on the program's asset reserves and from taxing benefits.
The OASI's asset reserves are expected to run dry in eight years. US Old-Age and Survivors Insurance Trust Fund Assets at End of Year data by YCharts.
The issue is that the Old-Age and Survivors Insurance trust fund (OASI) is forecast to exhaust its asset reserves by 2033. Though Social Security is in no danger of bankruptcy or failing to make payments, the existing payout schedule, including annual COLAs, is in jeopardy of being reduced if these asset reserves are depleted.
If the OASI's asset reserves dwindle, interest income will notably decline. Removing the tax on benefits would almost certainly accelerate the OASI's asset reserve depletion timeline and lead to steeper sweeping benefits cuts in the coming years -- i.e., potentially larger than the 21% already forecast by the Trustees by 2033.
It's also possible that politics played a role in Trump leaving this popular Social Security promise out of his flagship tax and spending bill.
The last thing Trump wants is his bill being defeated in a Republican-controlled Congress. Amending the Social Security Act requires 60 votes in the Senate, and Democrats have shown little or no willingness to work with Trump's Social Security proposals. Even if, hypothetically, all 53 Republicans in the upper house of Congress voted in favor of eliminating the tax on benefits, the president would still need seven more votes from the 45 Democrats and two Independents to amend the Social Security Act.
Regardless of whether it's one or both of these reasons, keeping the tax on benefits in place makes Social Security a financially stronger program.
