I’m retired, and as such, an important segment of my income comes from Social Security. If you’re a retired US citizen, chances are Social Security is important to you, too.
As a Social Security recipient, I occasionally get emails from the Social Security Administration (SSA) with important information, such as a new benefit letter is available for the coming year, or Social Security tax documents are ready.
I was surprised to receive an email from the Social Security Administration a couple of days ago with the following bold headline
Social Security Applauds Passage of Legislation Providing Historic Tax Relief for Seniors
Evidently, Trump’s administration had decided the best way to obscure the fact that tens of millions of people, including many seniors, are going to lose both healthcare and food assistance is to focus on one component of the bill they claim will be a savior for seniors.
I can assure you, my fellow Georgians: it’s not.
What was included in that monster bill just passed was a provision to provide an additional $6000.00 tax deduction to seniors that will apply only in the years 2025-2028.
Currently, we don’t pay taxes on Social Security if our incomes fall below $25,000 for an individual and $32,000 for a couple. Roughly 50 percent of Social Security recipients have income less than these upper limits and don’t pay income tax. In fact, many people don’t even have to file with the IRS annually because their income is too low.
Taxation on Social Security is relatively new (passed in legislation in 1984) and came about as a way to bolster dwindling Social Security and Medical trust funds. All of the money that comes from taxing Social Security income goes directly to these trust funds.
By increasing the standard deduction for seniors, Congressional Republicans have provided some additional income for middle and higher-income Social Security recipients, and will increase the numbers that don’t have to pay taxes. However, the amount seniors receive is relatively negligible.
According to the Tax Foundation, if all taxes for Social Security were eliminated, those in the 60-80% income percentiles would receive an additional 0.9 percent in income. With the increased deduction, these folks will receive an additional 0.3 percent. The White House touts number of people who won’t have to pay any income tax, but most of these folks have to pay very little anyway. As the Tax Foundation notes:
Overall, the increased senior deduction with the phaseout would deliver a larger tax cut to lower-middle- and middle-income taxpayers compared to exempting all Social Security benefits from income taxation and would not weaken the trust funds as much. But given the temporary nature of the policy, it would increase the deficit-impact of the reconciliation bills without boosting long-run economic growth.
Both the additional amount seniors will receive and the temporary nature of the deduction combine to negate any lasting positive impact of the new deduction. However, there is a lasting negative impact on the Social Security and Medicare trust funds.
According to a report in Fox Business:
The nonpartisan Committee for a Responsible Federal Budget (CRFB) estimated that the One Big Beautiful Bill Act’s tax policy changes would result in those depletion dates moving up from early 2033 to late 2032 for Social Security’s Old-Age and Survivors Insurance trust fund and from late 2033 to mid-2032 for Medicare’s Hospital Insurance trust fund.
The deduction for seniors is nothing but smoke and mirrors, but it’s smoke and mirrors that actually increases the vulnerability of seniors in the long run.
Fox Business: Experts warn Senate tax bill accelerates Medicare and Social Security insolvency dates
