President Trump’s plan to eliminate taxes on Social Security benefits has sparked controversy, particularly among seniors who rely heavily on the program for their income. While the proposal may seem appealing at first glance, it comes with significant trade-offs that could harm low-income households.
The current system is facing a major crisis. The Social Security trust fund’s balance has shrunk by $260 billion since 2018, and its assets are expected to be depleted in 2033, leaving only 79% of retirement benefits covered. This translates to a permanent 21% cut for seniors without substantial reforms.
Most people will not pay as much in taxes as the proposed cuts would entail. However, eliminating taxes on Social Security income will reduce revenue, accelerating the depletion of the trust fund. A study from the University of Pennsylvania’s Wharton School of Business estimates that ending taxation on benefits will reduce revenue by $1.45 trillion over the next 10 years.
As a result, seniors can expect a much bigger burden on their household budgets in just a few years than current taxes present right now. Low-income households, which rely heavily on Social Security benefits, will be hit particularly hard.
The proposal does not address the program’s underlying challenges and instead serves to benefit high-income households in the short run. Maintaining taxes on Social Security is necessary to ensure the program’s health and longevity, but eliminating them would move it in the wrong direction.
Source: https://www.fool.com/retirement/2025/03/22/president-trumps-biggest-social-security-proposal