Lawmakers in Congress have recently introduced legislation aimed at exempting Social Security from federal income tax, a proposal originally put forth by President Trump during his campaign. Rep. Angie Craig announced the You Earned It, You Keep It Act, while Rep. Jeff Van Drew and Rep. Thomas Massie introduced similar bills. President Trump has also urged Congress to pass a tax and spending bill fulfilling campaign promises, including no tax on Social Security.

However, exempting Social Security from taxes could have negative consequences for retired workers. Social Security is primarily funded by payroll taxes, benefit taxes, and interest on trust fund assets. The program faces deficits as the retired population grows faster than the taxpaying population. The Congressional Budget Office predicts the Trust Fund will be exhausted by 2034, leading to a 23% cut in benefits by 2035.

Eliminating taxes on Social Security benefits could worsen the program’s financial outlook, hastening the depletion of the Trust Fund. The Committee for a Responsible Federal Budget estimates this change could lead to a 33% benefit cut by 2035. Lawmakers’ proposals to end taxes on Social Security, tips, and overtime could bring trust fund depletion forward by three years, necessitating swift action to address the funding shortfall.

In conclusion, while the idea of eliminating taxes on Social Security may sound appealing, experts warn that it could accelerate benefit cuts and exacerbate the program’s financial challenges, ultimately impacting retired workers negatively.