In March, more than 52 million retired workers took home an average Social Security benefit of nearly $2,000. While this is a relatively modest monthly sum, this income has proved vital to helping retirees make ends meet.

Since 2002, Gallup has been conducting annual surveys to decipher how important the income retirees receive from Social Security is. Over this 23-year stretch, between 80% and 90% of respondents have consistently noted their monthly benefit is needed, to some degree, to cover their expenses.

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Protecting and strengthening Social Security should be a priority for our elected officials. However, reports suggest Social Security’s financial foundation has been weakening for decades.

President Trump delivering remarks. Image source: Official White House Photo by Andrea Hanks, courtesy of the National Archives.

Current and future retirees are looking to their elected officials on Capitol Hill — including President Donald Trump — to enact reforms that’ll bolster Social Security. The only problem is, not every idea is necessarily a good one.

Social Security benefit cuts are a projected eight years away

Before diving into what Trump has done through his first 100 days in office, as well as what he plans to do, it’s important to understand what awaits America’s leading retirement program if nothing is done.

Ever since the first retired-worker benefit check was mailed out in January 1940, the Social Security Board of Trustees has published an annual report that, in detail, examines the financial health of the program. In addition to outlining every dollar received and where those dollars end up, the Trustees Report is perhaps best known for its forward-looking projections.

The Trustees Report takes into account a number of factors, including changing monetary and fiscal policy, as well as ongoing demographic shifts, to forecast how financially sound Social Security will be over the coming 75 years (what it defines as the “long term”). For the last 40 years, the Trustees Report has warned of a long-term funding deficit.

Based on the 2024 Social Security Board of Trustees Report, the program is staring down a $23.2 trillion funding obligation shortfall. In other words, projected income collection won’t be sufficient to cover outlays, which primarily includes benefits, but also accounts for the costs to operate Social Security.

The OASI’s asset reserves are forecast to run out by 2033. US Old-Age and Survivors Insurance Trust Fund Assets at End of Year data by YCharts.

Making matters worse, the Trustees expect the asset reserves — i.e., excess cash built up since inception — of the Old-Age and Survivors Insurance Trust Fund (OASI) to be exhausted by 2033. Though the OASI is in no danger of bankruptcy and doesn’t require its asset reserves to dole out benefits, the continuity of the existing payout schedule, including cost-of-living adjustments (COLAs), is at risk beyond 2033.

If the OASI’s issues aren’t addressed and the asset reserves run dry, retired workers and survivor beneficiaries could see their monthly payout slashed by up to 21% in eight years.

President Trump has made changes already — but the biggest is still on the docket

Most elected officials, including President Trump, recognize that Social Security needs attention. In the same respect, lawmakers also fear making changes that upset future voters, which is why little has been done over the last four decades.

Since Inauguration Day for Trump’s second term, he’s made five notable changes to Social Security:

1. Through his commissioning of the Department of Government Efficiency (DOGE), Trump is overseeing the reduction of the Social Security Administration’s (SSA’s) staff by 7,000 to 50,000.
2. Trump signed an executive order to end paper Social Security checks, effective Sept. 30, 2025.
3. He oversaw the alteration of personal identification methods used by the SSA.
4. Trump reversed former President Joe Biden’s overpayment and recovery rules by implementing a 50% clawback rate on a person’s monthly benefit until the overpayment is recovered in full.
5. The president nominated Frank Bisignano to become the new SSA commissioner.

However, it’s the drastic change Donald Trump wants to make that could really shake up Social Security.

.@POTUS: “In the coming weeks and months, we will pass the largest tax cuts in American History–and that will include No Tax on Tips, NO Tax on Social Security, and No Tax on Overtime. It’s called the one big beautiful bill…” pic.twitter.com/SRwaWoY9gZ

— Rapid Response 47 (@RapidResponse47) April 29, 2025

On April 29, Trump doubled down on his desire to pass a flurry of tax cuts, which includes eliminating the tax on Social Security benefits.

The Social Security Amendments of 1983, which is the last bipartisan overhaul of the program, gradually raised the full retirement age and payroll tax, as well as introduced the now-hated taxation of benefits.

When the tax on benefits went into effect in 1984, up to 50% of benefits could be taxed at the federal rate if provisional income (adjusted gross income + tax-free interest + one-half of Social Security benefits) topped $25,000 for a single filer or $32,000 for a couple filing jointly. A second tax tier was added a decade later that allowed up to 85% of benefits to be taxed at the federal rate when provisional income surpassed $34,000 for single filers and $44,000 for jointly filing couples.

Four decades ago, this tax was expected to impact around 10% of senior households. But since the provisional income thresholds have never been updated to account for the effects of inflation, the combination of higher wages and COLAs over time means around half of all senior households are subjected to this tax today.

Image source: Getty Images.

Trump’s effort to rid Social Security of the tax on benefits will backfire

Hypothetically, if Trump were successful in amending the Social Security Act to remove the tax on benefits, it would provide an immediate boost to the take-home income of around half of all senior households. While beefing up Social Security income might sound like a can’t-miss proposal, what’s popular isn’t always what’s best for America’s leading retirement program.

The prevailing issue with Trump’s “no tax on Social Security benefits” proposal is that it would eliminate one of the three sources of funding for the program.

In 2023, Social Security collected approximately $1.351 trillion in income from three sources:

1. The 12.4% payroll tax on earned income (applicable between $0.01 and $176,100 in 2025), which accounted for more than 91% of what was collected in 2023.
2. The interest earned on the OASI’s and Disability Insurance Trust Fund’s asset reserves, which are invested in special-issue government bonds, as required by law.
3. The taxation of Social Security benefits.

Even though the payroll tax does most of the heavy lifting, funding source No. 2 is going to dwindle as the OASI’s asset reserves shrink. If Trump also eliminated funding source No. 3, Social Security would be missing out on a significant portion of its annual income.

Taxing Social Security benefits has become an increasingly important source of income. US Old-Age, Survivors, and Disability Insurance Trust Fund Income from Taxation of Benefits Receipts data by YCharts.

Based on the 2024 Trustees Report, taxing benefits is forecast to generate almost $944 billion in aggregate income for Social Security from 2024 through 2033. Removing this income would almost certainly expedite the OASI’s asset reserve depletion timeline and potentially exacerbate how much payouts would need to be cut for retired workers and survivor beneficiaries.

Further, the retirees paying some level of tax on their benefits are in the mid to high end of the provisional income scale. Thus, Trump’s proposal would do nothing to financially aid the lifetime low earners who rely most on their Social Security income to make ends meet.

To round things out, amending the Social Security Act will require 60 votes in the Senate, which is a figure the president will have a virtually impossible time getting to. Democrats in the upper house have shown no support for Trump’s proposal, and it’s not yet clear if members of Trump’s own party would support his proposal given that the short-term payout boost would quickly give way to potentially steeper long-term benefit reductions.

Trump’s plan may be well intentioned, but it comes with some very serious unintended consequences.

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