No tax on Social Security: Why doesn't the Big Beautiful Bill include this important proposal?

As retirement pressures mount across the U.S., Social Security remains one of the most critical issues facing lawmakers. With inflation tightening budgets for millions of seniors and the Social Security trust fund inching closer to depletion, any proposed changes carry massive implications.

One of the most headline-grabbing ideas came from US President Donald Trump during his 2024 campaign was to eliminate taxes on Social Security benefits entirely. But while that may sound like a lifeline for retirees, many experts argue it could actually backfire.

Throughout his campaign, Trump assured voters that he would not raise the retirement age or cut benefits. Instead, he promised to "stretch every dollar" further by abolishing taxes on Social Security income, a move aimed at helping seniors keep more of their monthly checks.

However, when the House ed its latest tax reform package, referred to as the "One Big Beautiful Bill", Trump's proposal was nowhere to be found.

The high cost of a seemingly generous proposal

Social Security taxes are indeed complicated. The IRS uses something called "combined income" to determine how much of a person's benefits are taxable. This figure includes half of one's Social Security income, plus any adjusted gross income and untaxed interest. Depending on this total, retirees can pay taxes on up to 85 percent of their benefits.

The income limits haven't been adjusted for inflation in over 30 years, even as Social Security benefits have grown. In 2024, the average retiree was receiving roughly $2,000 per month, pushing more seniors into the taxable income zone. Still, for most low-income retirees, taxes on benefits are minimal or nonexistent. In fact, the lowest 40 percent of benefit-receiving households pay less than 1% of their benefits in taxes, while even the wealthiest households only pay about 20% on average.

What's more troubling is the fiscal impact of removing this tax entirely. According to the Committee for a Responsible Federal Budget, Social Security benefits taxation contributed $54 billion in revenue last year. While that may seem modest compared to the $1.1 trillion generated by payroll taxes, it plays a growing role in propping up the system.

The Social Security trust fund is projected to be exhausted by 2033. Once that happens, incoming revenue will only cover about 79 percent of scheduled benefits. Removing $54 billion in annual tax revenue could accelerate the depletion by over a year and potentially lead to even steeper benefit cuts.

What retirees are getting instead under the current bill

Although Trump's tax elimination plan didn't make it into the final legislation, seniors haven't been entirely left out. The "One Big Beautiful Bill" provides a $4,000 additional standard deduction for Americans age 65 and older, provided their income remains below certain thresholds. This targeted relief could help retirees reduce their overall tax burden without jeopardizing the solvency of the Social Security trust fund.

In effect, it's a compromise: smaller, targeted tax breaks for seniors that provide relief while still preserving one of Social Security's revenue streams. Experts say this is a more balanced solution that s low- and middle-income seniors without placing the program at even greater financial risk.