President Donald Trump Broke His Social Security Vow -- and It May Be the Best Thing That's Happened to Retirees

Yahoo

13 hours ago

President Donald Trump pledged to end the tax on Social Security benefits prior to and following his election.
However, Trump's flagship tax and spending law excluded this popular proposal for two very good reasons.
Even though the tax on benefits isn't going anywhere, retirees who needed the biggest boost were helped out by the One Big Beautiful Bill.
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In May, Social Security retired-worker benefits made history. For the first time in the nine-decade history of the program, the average monthly check for retired workers topped $2,000.
While this is a relatively modest monthly sum, Social Security income is indispensable for most retirees. National pollster Gallup has surveyed retirees annually for 24 years to gauge how important their monthly payout is from America's leading social program. In April 2025, a combined 86% responded that it represented a "major" or "minor" income source, which is in line with the 80% to 90% of respondents in prior surveys who have needed Social Security income, in some capacity, to make ends meet.
Nothing bears more importance to retirees than knowing how much they'll receive each month from Social Security -- and arguably nothing excited these beneficiaries more than President Donald Trump's vow to remove the hated tax on the program's benefits.
But with his "One Big Beautiful Bill" now signed into law, retirees have come to the realization that the president broke his promise. Ironically, however, this might be the best thing that has happened to retired beneficiaries.
In 1983, with the asset reserves of Social Security's trust funds nearly exhausted, a bipartisan Congress passed the Social Security Amendments of 1983, which President Ronald Reagan signed into law. They gradually increased the payroll tax and full retirement age for working Americans and introduced the now-hated tax on the program's benefits.
Beginning in 1984, up to half of benefits could be exposed to federal taxation if provisional income (defined as adjusted gross income + tax-free interest + one-half of benefits) topped $25,000 for single filers and $32,000 for couples filing jointly. A decade later, a second tax tier was added that exposed up to 85% of benefits in instances where provisional income surpassed $34,000 and $44,000 for single and married filers, respectively.
What's made taxing Social Security benefits such a sensitive subject is that these income thresholds, which were introduced decades ago, haven't once been adjusted for inflation. Taxing benefits was expected to affect around 10% of all senior households in the mid-1980s. Today, it's applicable to approximately half of all senior households.
During Donald Trump's presidential campaign, he proclaimed in all caps on Truth Social, "Seniors should not pay tax on Social Security." This was a sentiment that he reiterated at a town hall event months after his inauguration.
Based on the overwhelming popularity among existing beneficiaries of eliminating the tax on benefits, the expectation was for Trump's budget bill to follow through on his campaign and post-election vow. But this didn't happen for two very good reasons.
The prominent issue with Trump's popular proposal is that it would have financially crippled Social Security.
The Old-Age and Survivors Insurance trust fund (OASI), which is responsible for paying retired workers and survivor beneficiaries each month, is an estimated eight years away from exhausting its asset reserves. Though the OASI fund doesn't require a cent in asset reserves to continue doling out payments, the existing payout schedule is at risk of being slashed by 23% for retired workers and survivors come 2033.
If the president's proposal was somehow signed into law and the tax on Social Security benefits was eliminated, it would have removed one of the program's three sources of funding and expedited the timeline to the depletion of OASI asset reserves. More than likely, it would have also widened how much benefits would need to be cut to sustain payouts through 2099.
The other reason eliminating the tax on benefits was shelved has to do with politics. Whereas most tax and spending provisions in what is now Trump's flagship law could be dealt with through a process known as reconciliation (where a simple majority of votes in the House and Senate determines passage), amending the Social Security Act can't be done through reconciliation. It requires 60 votes in the Senate, which would necessitate bipartisan cooperation given that Republicans hold only 53 seats in the upper house of Congress.
Instead of holding up the budget bill or risking defeat, the "no tax on Social Security" provision was left out.
On the surface, the prospect of still having to pay tax on some portion of Social Security benefits probably isn't sitting well with retirees -- especially with President Trump pledging to remove this disliked tax on a number of occasions. But when push comes to shove, Trump bailing on his Social Security vow may actually be the best possible news for retirees on two fronts.
To begin with, abandoning the "no tax on Social Security" provision ensures the OASI asset reserves won't be exhausted demonstrably faster than they're currently projected to. While doing nothing isn't the right answer for Social Security, eliminating the tax on benefits was unequivocally the wrong answer with regard to the financial health of the program.
However, the real victory for retirees is the provision that replaced this vow to eliminate the tax on benefits.
Trump's flagship tax and spending law offers a number of tax breaks, including no tax on overtime or tips for select workers from 2025 through 2028, as well as a quadrupling in the deduction for state and local tax (SALT) from $10,000 to $40,000 through 2029.
But the highlight of Trump's newly signed law is the beefed-up standard deduction for seniors age 65 and above from 2025 through 2028. Retirees will receive an added $6,000 standard deduction -- or $12,000 (combined) when filing jointly -- if their adjusted gross income (AGI) is less than $75,000 for single filers and $150,000 if filing jointly. A 6% phase-out begins above these income thresholds, with single filers and married couples with AGIs above $175,000 and $250,000, respectively, not eligible for this added deduction.
Removing the tax on benefits would have specifically aided middle- and high-earning recipients who are currently paying tax on some portion of their benefits. Meanwhile, the temporary deduction boost from the One Big Beautiful Bill is aimed at reducing tax liability for low- and middle-income beneficiaries. In other words, this provision helps the retirees more likely to need a financial boost.
Ultimately, this is the best possible outcome for a majority of Social Security retirees.
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President Donald Trump Broke His Social Security Vow -- and It May Be the Best Thing That's Happened to Retirees was originally published by The Motley Fool