Goodbye to Social Security income taxes: this is the new proposed law that would affect millions of retirees and their IRS payments

Republicans, who are in control of both chambers of Congress, are working on extending the 2017 tax cuts, passed during President Trump’s first term in office, that are set to expire. On the campaign trail he proposed new ones like eliminating income taxes on tips, overtime pay and Social Security benefits which the White House says Trump expects to be part of an upcoming reconciliation bill.

However, the passage of those last three tax cut proposals is not guaranteed as GOP lawmakers will need to juggle “a lot of moving parts,” said Senate Majority Leader John Thune. He and other Republicans have been pushing for a “two-step” approach where Trump’s tax proposals are put into a separate bill. However, Trump and Speaker Mike Johnson want a single bill.

Experts say Trump’s elimination of Social Security taxes would speed up the program’s insolvency

Trump has said that roughly half of retirees would see an increase in their Social Security payments with his proposed elimination of taxes on benefits. The Social Security administration itself says that currently around 40% of beneficiaries pay income taxes on the money they receive from the program.

These are people who exceed certain income thresholds and those taxes are pumped back into the Social Security Trust Fund. Under Trump’s proposals including an end to taxes on tips and overtime, the imposition of tariffs, and expanding deportations would dramatically worsen the financial state of Social Security and have adverse consequences for beneficiaries.

Currently, without reforms to shore up the program, the Social Security Trust Fund will be drained by 2034 according to projections by the Congressional Budget Office. However, the Committee for a Responsible Federal Budget’s analysis found that Trump’s policies would advance the program’s insolvency by three years to 2031.

That would mean instead of a 23% cut across the board to benefits in 2035 on its current trajectory, seniors would see 33% benefit cut across the board (with a range of 29% to 39% depending on the scenario).

Trump wants GOP to push forward with Social Security tax cuts

White House press secretary Karoline Leavitt told reporters on Friday that Trump “has made it very clear to our allies on Capitol Hill” that he wants the elimination of income taxes on tips, overtime pay and Social Security benefits. “That is a critical piece of this reconciliation package,” she said.

Zeroing in on getting rid of taxes on Social Security benefits may be the most difficult to achieve. Changes to the program’s spending cannot be included in reconciliation bills under the senate’s Byrd rule. Additionally, a supermajority of 60 votes in the senate would be needed in order to amend the Social Security Act requiring bipartisan support for the proposal.

While Republicans control both chambers of Congress and the White House allowing them to push forward with the reconciliation process, they have very thin margins and cannot afford many defectors from the effort. With trillions of dollars in giveaways that will need to be paid for with new revenue streams or cuts that will have to be made in other areas that lawmakers may not be able to get behind.

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