Will 2025 Be the Year Trump Transforms Social Security? Find Out!

Recently, Americans cast their votes, either in person or by mail, to select the leader who will guide our country for the next four years. Just hours after the polls closed, the results rolled in, and the nation learned that the 2024 election was called in favor of former President Donald Trump.

Alongside Trump’s victory, Republicans seized enough seats to gain control of the Senate and held onto a narrow majority in the House of Representatives. This marks the first time since Trump’s original inauguration in January 2017 that the GOP has a unified government.

With a laundry list of issues awaiting attention, one of the most critical challenges for Trump and the incoming Congress will be addressing the troubling financial state of Social Security.

Social Security Faces an Alarming $23.2 Trillion Funding Shortfall

Since the very first Social Security checks were distributed back in January 1940, the Social Security Board of Trustees has diligently published annual reports on the program’s financial health and long-term viability.

For 40 years, these reports have echoed a dire warning: Social Security’s income won’t be enough to cover its expenses—namely, the benefits owed to retirees and survivors, along with minimal administrative costs. Shockingly, the program’s long-term funding gap has ballooned to an estimated $23.2 trillion.

And it’s not getting better. The Old-Age and Survivors Insurance Trust Fund (OASI), responsible for monthly benefits to retirees and survivors, is projected to run out of assets by 2033.

It’s essential to clarify that this doesn’t mean Social Security will go bankrupt. A staggering 91% of its income is generated from the 12.4% payroll tax on earnings—this includes wages and salaries, but notably excludes investment income. As long as workers are paying into the system, there will be funds to distribute to eligible beneficiaries.

What is at stake, however, is the sustainability of current benefits, including the all-important cost-of-living adjustments (COLA). Without significant reforms, benefits could be slashed by as much as 21% within the next nine years if OASI’s reserves are depleted.

While social media can often point fingers at “congressional theft” or “undocumented immigrants” for Social Security’s financial woes, the primary culprit is the ongoing demographic shift, including:

The OASI’s assets are forecasted to be depleted by 2033. US Old-Age and Survivors Insurance Trust Fund Assets at End of Year data by YCharts.

Trump’s Vision for Social Security Reform

During his campaign for another term, Trump pledged to safeguard Social Security—something every candidate promises. But in late July, he went a step further, revealing specifics on his reform plans. On his Truth Social platform, Trump declared, “Seniors should not pay tax on Social Security.” He’s proposing the elimination of taxes on Social Security benefits.

Back in 1983, amid looming concerns about Social Security’s financial stability, Congress enacted significant reforms that President Ronald Reagan signed into law. This included raising payroll taxes, increasing the full retirement age, and introducing taxation on benefits.

From 1984 onward, up to 50% of benefits could be taxed at the federal level if provisional income (a combination of adjusted gross income, tax-free interest, and half of the benefits) exceeded $25,000 for single filers or $32,000 for couples. In 1993, a second tax tier emerged under the Clinton administration, taxing up to 85% of benefits at higher provisional income thresholds.

What makes this tax particularly unpopular among seniors is that it hasn’t been adjusted for inflation. When initiated 40 years ago, it applied to only 10% of households. Yet, as COLAs have increased benefits over time, an ever-growing number of seniors find themselves subject to this tax.

Trump’s argument is that abolishing the tax on Social Security benefits would genuinely benefit seniors grappling with inflation. According to The Senior Citizens League, the purchasing power of a Social Security dollar has plummeted by 20% since 2010.

With Republicans controlling Congress and Trump proposing a widely supported change, the burning question remains: Could this reform actually come to fruition in 2025?

Trump’s Ambitious Social Security Plans Face Major Obstacles

While public sentiment strongly favors eliminating taxes on benefits, two monumental challenges lie ahead for Trump in modifying the Social Security Act.

First, he’ll have to justify the removal of one of Social Security’s primary income streams. As highlighted earlier, over 91% of Social Security’s income comes from payroll taxes, while the remainder is derived from interest and taxation of benefits.

Eliminating the taxation of benefits would deal a significant blow to the program’s future income. The latest Trustees Report estimates that this tax will generate approximately $943.9 billion in revenue between 2024 and 2033. Cutting this source could hasten the depletion of OASI’s reserves and intensify the benefit cuts necessary to keep the program afloat for the next 75 years.

In straightforward terms, what may be popular doesn’t necessarily align with fiscal responsibility. Despite the widespread disdain for the tax on benefits, lawmakers have little incentive to abolish it or even adjust it for inflation, especially given the mounting long-term funding issues.

The second hurdle Trump faces is navigating the 60 votes required in the Senate to amend the Social Security Act.

The last time either party managed to secure a supermajority of 60 seats in the Senate was in 1979. As a result, any amendments to this crucial program will necessitate bipartisan support. Even if every Republican aligned with Trump’s vision in 2025, he would still need the backing of seven Democrats—a scenario that seems unlikely.

While a united Republican government could streamline personal and corporate tax reforms, the taxation of Social Security benefits will likely remain unchanged, with no alterations anticipated in 2025.