The Trump administration introduced several changes to the Social Security program over the past year. These moves included reducing administrative costs, raising the overpayment recovery rate, and rolling out a new telecommunications platform designed to curb fraud and improve customer service.
In addition, President Trump signed the One, Big, Beautiful Bill Act (OBBBA) into law on July 4. The legislation created a new senior deduction that helps offset income taxes on Social Security for certain beneficiaries aged 65 and older. However, the OBBBA stopped short of fulfilling Trump’s pledge to eliminate taxes on Social Security.
Still, some lawmakers in Washington continue to push to make that promise a reality. Others are also seeking changes to how the Social Security Administration calculates annual cost-of-living adjustments (COLAs). Here’s what retirees need to know.
1. Lawmakers want to eliminate federal income tax on Social Security benefits
President Trump pledged to end federal income tax on Social Security, and a White House press release claims: “No tax on Social Security is a reality in the One Big Beautiful Bill.” However, that statement is misleading. The legislation simply introduced an additional senior deduction that offsets those taxes in certain situations.
However, the deduction does not apply to beneficiaries under age 65, and it also excludes beneficiaries aged 65 and older whose income exceeds certain thresholds. The benefit phases out for single seniors earning more than $75,000 and married seniors earning more than $150,000. In addition, the deduction expires for all recipients after 2028.
As a result, several lawmakers have introduced legislation that would truly eliminate taxes on Social Security:
- In 2025, Sen. Ruben Gallego (D-Ariz.) and Rep. Angie Craig (D-Minn.) introduced the You Earned It, You Keep It Act.
- In 2025, Rep. Thomas Massie (R-Ky.) and Rep. Daniel Webster (R-Fla.) introduced the Senior Citizens Tax Elimination Act.
Senator Gallego says, “Trump claimed he ended taxes on Social Security. My bill actually does it. Permanently.” Similarly, Rep. Massie says, “My bill would exempt Social Security retirement benefits from taxation and boost the retirement income of millions of older Americans.”
Both proposals come with a significant drawback. The Social Security Trust Fund — the account that holds surplus tax revenue to pay future benefits — is already projected to run out by 2034, at which point benefit cuts would be required. Eliminating taxes on Social Security would remove a major funding source, pushing the trust fund’s depletion forward by more than a year, according to the Committee for a Responsible Federal Budget.
2. Lawmakers want to change how Social Security’s COLAs are calculated
The Senior Citizens League (TSCL), a nonpartisan advocacy group for seniors, argues that Social Security’s COLAs have failed to keep pace with inflation because they are calculated incorrectly. “The average senior who retired in 1999 has lost nearly $5,000 in Social Security payments as a result of the government using the wrong price index to calculate cost-of-living adjustments,” according to TSCL.
Currently, COLAs are tied to a subset of the Consumer Price Index (CPI) known as the CPI-W, which tracks inflation based on the spending patterns of hourly workers. However, those workers spend money differently than Social Security recipients, making the CPI-W a poor measure of inflation for that group.
Instead, some policy experts believe COLAs should be based on another CPI subset known as the CPI-E, which measures inflation using the spending habits of individuals aged 62 and older. Under that approach, TSCL estimates that workers who retired in 2024 would receive an additional $12,000 in lifetime benefits.
Earlier this year, Sen. Richard Blumenthal (D-Conn.) and Rep. Nikki Budzinski (D-Ill.), along with a dozen cosponsors, introduced the Boosting Benefits and COLAs for Seniors Act. The proposal would change how the Social Security Administration calculates COLAs by replacing the CPI-W with the CPI-E.
Social Security’s Office of the Chief Actuary estimates that this change would raise COLAs by an average of 0.2 percentage points each year. That would result in larger annual benefit increases for retired workers. However, it would also speed up the depletion of the Social Security Trust Fund, giving Congress less time to find a solution that prevents across-the-board benefit cuts.
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