Bill To Eliminate Social Security Taxes Introduced In The House

Legislation to axe the tax on Social Security benefits was introduced by Rep. Thomas Massie (R-Ky.). President Trump had pledged on the campaign trail to end taxes on Social Security benefits.

The bill, the Senior Citizens Tax Elimination Act, H.R. 1040, was reintroduced on Feb. 6 by Rep. Thomas Massie, with 29 Republican co-sponsors.

“My bill would exempt Social Security retirement benefits from taxation and boost the retirement income of millions of older Americans,” Massie, a Republican who represents Pennsylvania, said in a statement.

Specifically, Massie’s bill would repeal the inclusion of Social Security benefits in gross income for federal tax purposes. The change would restore the tax-free nature of Social Security benefits, which came to a screeching halt some 41 years ago when lawmakers decided to tax benefits for high-income recipients as part of Social Security reform.

"Before 1984, Social Security benefits were exempt from the federal income tax. Congress then enacted legislation to tax a portion of those benefits, with the share gradually increasing as a person's income rose above a specified income threshold," Massie said.

Massie said the benefits tax actually amounts to double taxation, which should be eliminated. “Although seniors have already paid tax on their Social Security contributions via the payroll tax, they are still required to list these benefits as taxable income on their tax returns," the lawmaker noted. "This is simply a way for Congress to obtain more revenue for the federal government at the expense of seniors who have already paid into Social Security,”

The bill, which Massey first introduced last year,  would also terminate the inclusion of tier I railroad retirement benefits in gross income for federal tax purposes.

The elimination of Social Security benefit taxes would save the average senior household approximately $3,000 per year in federal income tax, according to the Senior Citizens League, which estimates that the average senior household receiving Social Security benefits currently pays approximately $7,022.

But there are also costs to consider as federal budget deficits have run near $1.8 trillion annually in recent years. Completely eliminating taxes on Social Security for all taxpayers would cost the government $1.6 trillion to $1.8 trillion in revenues through 2035, according ot the Committee for a Responsible Government. The group also estimates that doing away with taxes on the entitlement benefit would advance the insolvency date of Social Security’s retirement trust fund by more than a year.

The Social Security Administration (SSA) projects that Social Security trust fund reserves will be depleted by 2033, resulting in a potential 21% reduction in benefits. That would mean an average annual reduction of $4000 in benefits, the Committee for a Responsible Government estimates.

Both Massey and the Senior Citizens League (TSCL) said the elimination of Social Security benefit taxes would also help seniors combat inflation and regain their purchasing power, which has decreased by almost $4,500 since 2010 when adjusted for inflation.

For funding, the bill calls on Treasury to appropriate funds from other sources to maintain benefits. The Senior Citizens League offered its own suggestion. "We would prefer to have an offset mechanism, but the bill could be passed, and paying for it could be accomplished under comprehensive and much-needed Social Security Reform later," Shannon Benton, executive dirrector of The Senior Citizens League told Financial Advisor.

Benton added that almost half of all Social Security recipients pay taxes on "a portion of their benefits." If the bill passes into law, it will definitely be a "savings for millions" of beneficiaries.

Senators Roger Marshall and Marsha Blackburn have also introduced legislation to lower the tax burden on Social Security benefits for seniors.

The Reducing Excessive Taxation and Inefficiencies by Reforming Elder Exemptions to Support Fairness, Inflation Relief, and Simple Taxes (RETIREES FIRST) Act, was originally introduced in December, 2024.

 The bill aims to lower the tax burden on Social Security benefits for seniors and would raise the provisional income threshold to $34,000 for single filers and $68,000 for married filers.

The legislation would require that thresholds be updated annually to prevent bracket creep and protect retirees from inflation.  The bill would also simplify tax rules to maintain a single 85% inclusion rate for benefits exceeding the new thresholds.

For funding, the senators seek to redirect funds from what they say is “inefficient government spending,” including non-defense, non-veteran and non-homeland security discretionary appropriations accounts.