Is Trump’s Proposal to Abolish Social Security Tax Really Beneficial for the Elderly? Let’s Understand in Simple Language

On: Wednesday, April 16, 2025 5:49 AM

Is Trump's Proposal to Abolish Social Security Tax Really Beneficial for the Elderly? Let's Understand in Simple Language

Donald Trump has made a big and bold proposal – he wants the federal tax on Social Security to be abolished. At first glance, this news seems like a good thing for all the elderly, especially those who are living on a fixed income i.e. a fixed pension.

But when we look deeply into this proposal, it is known that its real benefit will go to rich retired people. On the other hand, the poor and middle class elderly will not get much benefit from it. Also, experts believe that if this tax is removed, the government may lack money for important programs like Social Security and Medicare. This can put the future of these schemes in danger.

First of all know: Who pays tax on Social Security?

Not everyone has to pay tax on Social Security. In fact, about 60 percent of retired people do not pay any tax on their Social Security income. That’s because their annual income is below the level where taxes start.

But the remaining 40 percent have a little more income — such as pensions, bank interest, investment earnings or retirement savings. Such people are taxed through “Combined Income.” For example:

If an individual earns more than $25,000 a year,
Or a couple (joint filing spouse) earns more than $32,000,

Then anywhere from 50% to 85% of their Social Security income can be counted for tax.]

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What is Trump’s proposal?

Trump is proposing to eliminate the federal income tax on Social Security benefits altogether — no matter how much a person earns. This sounds beneficial for all seniors, but it’s not really that simple.

Now the question arises that who will benefit from this proposal?

Rich retired people will get the most benefit

According to the Tax Policy Center, those who earn the most money in America – that is, the top 0.1% (such as those who earn about $5 million or more a year) – will get a tax cut of about $2500 from Trump’s proposal. These are the same people who currently pay the most taxes.

Now think – Social Security was created for those people who live with limited resources after retirement. But Trump’s proposal is giving a big benefit to those people who are already earning in crores.

Many people find this thing inequitable.

No benefit to poor and ordinary retired people

As we told earlier, about 60% of the elderly already do not pay tax on Social Security. In such a situation, even if the tax is removed, it will not make any difference for them.

For example, let’s say an elderly woman whose entire income comes from Social Security and she earns less than $20,000 per year – she already falls in the tax-free zone. Trump’s proposal will not bring any change in her life.

Middle class retirees will get very little benefit

If a retired person or couple is earning between $32,000 and $60,000 a year, then they can get a tax benefit of about $90 annually from Trump’s proposal.

Now think – how much is the benefit of $90 in a year? On a monthly basis, there is a difference of only ₹600-₹700 rupees.

While a rich retired person is getting a tax benefit of up to ₹2 lakh (about $2500) annually.

What will be the average tax cut?

If seen, the average tax cut for all retired people will be around $550. But this average looks bigger because some rich people are getting huge benefits, which is pulling this average up.

In reality, people with middle and lower income will get very little or no benefit.

Government to lose $1.5 trillion!

Now let’s talk about the biggest concern – money.

This proposal of Trump can cause a loss of about $1.5 trillion (ie Rs 125 lakh crore) to the US government in the next 10 years. This money is currently used in programs like Social Security and Medicare.

If this money stops coming, then the government will either have to cut the benefits of these programs, or impose some new tax. And the worst – Social Security may soon go bankrupt.

Can this cut Social Security benefits soon?

The Social Security Trust Fund is already in danger. According to reports, this fund could be exhausted in the early 2030s — which could lead to a 20% cut in benefits.

If Trump’s proposal is implemented and the government stops receiving money from Social Security taxes — this threat could come even sooner.

That is, those who need it the most — the elderly — will be affected first.

Critics’ opinion — a gift to the rich, a betrayal to the poor

Many experts and economists believe that this proposal is actually like giving a gift to the rich.

An economist said, “This proposal sounds good, but when 60% of the elderly are not paying taxes anyway, then this decision will only benefit the rich.”

If the elderly really want to be helped, why not take measures that make the lives of poor and middle-class elderly easier?

What can be done instead?

Some better options could be:

Increasing the Social Security amount of poor elderly
Increasing the income limit of tax so that the middle class gets relief
Providing income-based tax credit to needy elderly
Strengthening the system by increasing the payroll tax on the rich

These measures will provide relief to the needy and will also protect Social Security in the future.

Finally – is this policy in the right direction?

Trump’s proposal looks like help for the elderly, but in reality it benefits the rich a lot, and does not provide any relief to the poor. Also, it can put important systems like Social Security and Medicare in danger.

Now the question arises – should tax cuts be given to those who need it the most, or to those who are already very rich?

The public and policy-makers need to think seriously about this.