Former President Donald Trump has proposed changing Social Security by eliminating the taxation of benefits, a move that could put more money back into the pockets of seniors who have struggled with inflation. However, this plan faces two significant headwinds.
Firstly, the elimination of the taxation of benefits would result in a significant loss of income for Social Security, which relies on this tax to generate 91% of its revenue. Estimates show that removing this income source could expedite the depletion of the Old-Age and Survivors Insurance Trust Fund’s asset reserves, potentially exacerbating benefit cuts needed over the next 75 years.
Secondly, amending the Social Security Act requires a supermajority of votes in the Senate, with at least 60 senators supporting the change. Given that no party has held a supermajority since 1979, any proposed amendments would require bipartisan support. Even if all Republicans supported Trump’s plan, seven Democrats would also need to join them, making this highly improbable.
Despite public opinion favoring the elimination of the taxation of benefits, fiscal sense and political realities suggest that this change is unlikely to materialize in 2025. The Senior Citizens League estimates that the buying power of a Social Security dollar has declined by 20% since 2010, highlighting the need for reforms. However, any changes would require careful consideration to avoid exacerbating the program’s long-term funding obligation shortfall.
Source: https://www.fool.com/retirement/2024/12/07/donald-trump-change-social-security-2025-reality