Two big Social Security changes are being considered in Washington — here’s what it means

The Trump administration has already made several changes to Social Security in the past year, including cutting administrative costs, increasing overpayment recovery, and launching a new phone system to reduce fraud and improve service.

On July 4, President Donald Trump signed the One, Big, Beautiful Bill Act (OBBBA) into law, which added a new tax deduction for some seniors aged 65 and older to reduce taxes on Social Security income, according to The Motley Fool. The OBBBA did not fully end taxes on Social Security, even though a White House press release claimed, “No tax on Social Security is a reality in the One Big Beautiful Bill”.

Limits of new tax break

The new senior deduction does not apply to people under age 65 and also does not apply to seniors with higher incomes. The deduction is phased out for single seniors earning over $75,000 and married seniors earning over $150,000. The deduction is temporary and will expire for everyone after 2028. Because of these limits, some lawmakers in Washington want to fully eliminate federal income taxes on Social Security benefits.


In 2025, Sen. Ruben Gallego of Arizona and Rep. Angie Craig of Minnesota introduced the “You Earned It, You Keep It Act”. In 2025, Rep. Thomas Massie of Kentucky and Rep. Daniel Webster of Florida introduced the “Senior Citizens Tax Elimination Act”. Sen. Gallego said, “Trump claimed he ended taxes on Social Security. My bill actually does it. Permanently,” as cited by The Motley Fool. Rep. Massie said, “My bill would exempt Social Security retirement benefits from taxation and boost the retirement income of millions of older Americans”.

Trust fund risk

Experts warn that eliminating taxes on Social Security would reduce funding for the Social Security Trust Fund, which is already expected to run out by 2034. Ending Social Security taxes could move the trust fund depletion date forward by more than one year, according to the Committee for a Responsible Federal Budget. Lawmakers are also considering a second major change: updating how annual cost-of-living adjustments (COLAs) are calculated.

The Senior Citizens League (TSCL) says current COLAs do not keep up with real inflation for retirees. TSCL says, “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”, as noted The Motley Fool. Right now, COLAs are based on the CPI-W, which tracks inflation for hourly workers, not retirees. Seniors spend money differently than workers, making the CPI-W a poor fit for Social Security recipients.

Plan to change COLA

Some experts want COLAs to be calculated using the CPI-E, which tracks spending by people aged 62 and older. TSCL estimates that if CPI-E were used, workers who retired in 2024 would receive about $12,000 more in lifetime benefits. Earlier this year, Sen. Richard Blumenthal of Connecticut and Rep. Nikki Budzinski of Illinois introduced the “Boosting Benefits and COLAs for Seniors Act,” along with other lawmakers.

The bill would replace the CPI-W with the CPI-E when calculating Social Security COLAs. Social Security’s Office of the Chief Actuary estimates this change would raise COLAs by about 0.2 percentage points per year. Higher COLAs would mean bigger yearly benefit increases for retirees, as noted by The Motley Fool. However, higher COLAs would also drain the Social Security Trust Fund faster, giving Congress less time to prevent future benefit cut. For now, both proposed changes face big funding challenges, and no final decisions have been made.

FAQs

Q1. Will Social Security taxes be removed completely?

No, lawmakers are proposing new bills, but taxes on Social Security have not been fully removed yet.

Q2. Why do some lawmakers want to change Social Security COLA?

They say the current formula does not match real living costs for seniors.