As recently as last year, Social Security trustees bragged that Social Security wouldn’t reach insolvency until 2034 and that the following year, benefits would only have to be cut by 17%. In its dire and devastating long-term budget outlook for the next 30 years, the nonpartisan Congressional Budget Office put that lie to bed. In reality, the CBO said, Social Security is slated to reach insolvency by 2033 with a subsequent benefit cut of 24%.
This 24% benefit cut in nine years is the preferred policy of Washington, D.C.,’s bipartisan consensus that we must “protect” Social Security from any and all reform. This is the stated position of the Trump administration, even considering that a three-year increase to the retirement age is “disgusting,” as Commerce Secretary Howard Lutnick said during an interview on the All In podcast. (Recall that the retirement age has remained constant in the near century the program has existed, while average American life expectancy has risen by 23%.)
In fact, President Donald Trump’s proposal to exempt today’s Social Security handouts from income taxation would only expedite the program’s insolvency. The Penn Wharton Budget Model found that eliminating income taxes on Social Security would cost $1.5 trillion over the next decade and speed up the program’s projected insolvency date to 2032. Because about half of all current Social Security beneficiaries already pay no income tax, Trump’s proposal effectively pays the wealthiest members of the wealthiest generation in history by robbing a quarter of the future benefits owed to their children.
Even without including the economic costs of Trump’s trade war or the one big beautiful bill, the CBO projected that Social Security, major healthcare entitlements such as Medicare, and paying down on the interest on our already extant national debt would consume 83% of all revenue given to the federal government by taxpayers this year. By 2055, the CBO projected the national debt — a third of which is owned by foreign investors — would amount to 156% of our GDP, and one dollar of every four generated by the economy would go to federal spending.
And what about that one big beautiful bill? Failing to extend the imminently expiring provisions of the TJCA would constitute a tax hike on 62% of Americans heading into the 2026 midterm elections and a further cut to the corporate tax rate, especially for corporations that onshore more of their operations onto American soil, would spur some extra growth and offset the more contractionary consequences of Trump’s trade war.
DEMOCRATS HAVE LEARNED NOTHING ON IMMIGRATION
But Trump’s allies have signaled he wants Social Security’s exemption from income taxation included in the one big beautiful bill, which, combined with the roughly $4 trillion cost of TCJA extension, would bring the total 10-year cost of the bill to at least $6 trillion. Moreover, unlike expanding the child tax credit or cutting the corporate tax, exempting Social Security handouts from income taxation would not instigate economic growth or labor force expansion in the long run. In fact, Penn Wharton estimated that it would reduce GDP by 2% by 2054.
Social Security is already slated for disaster. Exempting it from taxation would only speed up the inevitable.