Trump Wants To Eliminate Income Taxes: 2 Ways This Could Impact Your Social Security Benefits in 2025
Written by
Vance Cariaga
Edited by
Daria Uhlig
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U.S. presidential candidates have a long history of floating ideas that might never see the light of day but are guaranteed to grab headlines. Time will tell if that applies to ex-President Donald Trump’s recent suggestion that federal income taxes should be eliminated in favor of an “all tariff” policy. If such a policy were ever to be enacted, it would have a major impact on all Americans — including Social Security recipients.
In June, Trump broached the idea of getting rid of income taxes during a private meeting with Republican lawmakers, CNBC reported. He’s a vocal advocate of imposing stiff tariffs on imported goods to help protect U.S. manufacturing, but those tariffs typically lead to much higher prices on consumer goods. Trump’s reasoning is that higher prices could be offset by eliminating income taxes.
The idea got immediate pushback from many tax and policy experts, who say tariffs will not provide nearly enough income to fund the government. Meanwhile, Trump will have a hard time convincing Congress to go along should he win a second term in November.
More recently, a Trump post on his Truth Social network suggested getting rid of federal income taxes on Social Security benefits. Of course, if he eliminates income taxes altogether, taxes on Social Security benefits would naturally follow.
You Might Get a Bigger Monthly Check
If Social Security is your only source of retirement income, chances are you don’t pay federal income taxes on it. But if you have outside income, there’s a good chance you’ll have to pay taxes. Depending on your income, either 50% or 85% of your benefits will be taxable. You can pay the IRS directly or have taxes withheld from your monthly payment, according to the Social Security Administration. With no more income taxes, those payments and withholdings will no longer apply.
Your Benefits Might Be Cut
Eliminating taxes on Social Security benefits would put the already stressed program under even greater financial strain. Social Security’s Old Age and Survivors (OASI) Trust Fund is due to run out of money within the next decade, leaving the program solely dependent on payroll taxes for funding. Payroll taxes currently fund about 77% of benefits, but the program also gets money from income taxes.
If income taxes are eliminated, the Committee for a Responsible Federal Budget estimates that the trust fund’s insolvency date could be pushed up by more than a year. Some lawmakers have suggested cutting retirement benefits to deal with the shortfall when the fund becomes insolvent. If Republicans control Congress in 2025 — and fiscal hawks hold key positions — they could quickly enact legislation to cut Social Security benefits in the event that income taxes are eliminated. However, Trump would have to sign off on legislation, which is no sure thing.
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