A new bill introduced by U.S. Senators Roger Marshall and Marsha Blackburn proposes significant changes to Social Security taxation, promising financial relief for millions of retirees. While proponents hail it as a long-overdue measure to boost retirement income, there are concerns it could strain the Social Security trust fund or add to the national deficit.
Newsweek reached out to Senators Marshall and Blackburn via email for comment.
Why It Matters
According to the Social Security Administration (SSA), the estimated average monthly Social Security retirement benefit for January 2025 is $1,976. For many retirees, these Social Security payments are a primary source of income.
However, millions of Americans see a portion of their benefits taxed. This impacts their financial security, particularly at a time when inflation and health care costs continue to be significant concerns, putting additional strain on retirees' budgets.
Senators Marshall and Blackburn have introduced a bill that aims to eliminate the double taxation of Social Security benefits. If enacted, millions of retirees could be exempted from federal taxes on their Social Security income.
What To Know
Social Security was initially designed as a tax-free benefit when it was first introduced in 1935. However, changes in the 1980s and 1990s introduced taxation on up to 85 percent of benefits for higher-income retirees. This has led to frustration among many who feel they are being taxed twice on their income.
The Congressional Budget Office estimated that around 50 percent of Social Security beneficiaries paid income tax on their benefits in 2021. And a 2015 Social Security Administration analysis projected over 56 percent of beneficiary families will be subject to income tax on their Social Security benefits by 2050.
On February 4, 2025, Marshall and Blackburn reintroduced the Reducing Excessive Taxation and Inefficiencies by Reforming Elder Exemptions to Support Fairness, Inflation Relief, and Simple Taxes (RETIREES FIRST) Act. The bill aims to lower the tax burden on Social Security benefits for seniors. This follows a previous introduction of the bill on December 19, 2024.
Key provisions include:
- Raising the provisional income threshold to $34,000 for single filers and $68,000 for married filers.
- Updating the thresholds annually to prevent bracket creep and protect retirees from inflation's impact.
- Simplifying tax rules to maintain a single 85 percent inclusion rate for benefits exceeding the new thresholds, simplifying the filing process and reducing confusion for seniors.
- Redirecting funds from inefficient government spending in non-defense, non-veterans and non-homeland security discretionary appropriations accounts. This ensures the Social Security and Medicare trust funds are safeguarded while prioritizing retirees.
According to the IRS, if individuals have a combined income (which includes adjusted gross income, nontaxable interest and half of their Social Security benefits) that exceeds certain thresholds ($25,000 for individuals and $32,000 for married couples filing jointly), they may be required to pay federal income tax on a portion of their Social Security benefits.
By increasing these thresholds to $34,000 for single filers and $68,000 for married filers, fewer retirees would fall into the taxable category, allowing them to keep a larger portion of their Social Security benefits. This change would help reduce the financial burden on retirees, especially those on fixed incomes.
Proponents argue that retirees, especially those on fixed incomes, will benefit the most. Senator Marshall stated, "By cutting taxes on Social Security, this bill will ensure America's seniors can keep more of their hard-earned money and fix a fundamental flaw in our tax system."
What People Are Saying
Senator Marshall stated in a press release: "President Trump promised to protect Social Security and deliver relief to senior citizens by cutting taxes on these benefits. This simple action will put more money in seniors' pockets, correct a fundamental flaw in our tax system, and support President Trump's economic agenda and a promise made to the American people: No Tax on Social Security,"
Senator Blackburn stated in a press release: "Retirees across the country depend on Social Security, especially after enduring the record-high inflation of the last four years. This bill would cut taxes on seniors' benefits, helping them keep more of their hard-earned money."
Alex Beene, financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "The elimination of taxes on Social Security benefits was heavily discussed during the campaign, with President Trump vowing to consider cutting the tax on them a reality. This proposal wouldn't completely eliminate taxes on benefits, but it would raise the base income levels for recipients so that a substantial number of them would no longer have to pay tax and those that still have to would have a reduced burden.
It's a win for recipients. Few groups have encountered more headaches from inflation in recent years as America's seniors, who are facing increased prices on groceries, health care, and other daily expenses on a limited budget. At the same point, more of America's taxbase are entering the years where they qualify for Social Security benefits, and the reduction of them could be problematic for an already massive national deficit."
Kevin Thompson, founder and CEO of 9i Capital Group, told Newsweek: It's clear that our politicians are finding new ways to "defund" Social Security rather than addressing its solvency. First, we had the WEP and GPO, which redirected more money from the system despite estimates suggesting only a six-month impact—an assessment I strongly disagree with. Now, they're proposing to increase benefits for millions of Americans by raising the taxable limits on Social Security benefits.
I actually agree with this approach over a blanket zero tax on Social Security... However, Social Security taxation currently brings in around $50 billion annually. Reducing that revenue significantly raises concerns about the trust fund's long-term sustainability. ...The real answer is to increase the Social Security taxable wage base, but that may not be politically feasible.
The biggest winners from this proposal are lower-income households currently paying taxes on 50 percent of their benefits—they could see meaningful savings moving forward. However, many of my clients won't see any reduction in taxation. Those with substantial retirement savings will still have 85 percent of their benefits taxed as before. That said, this does open up planning opportunities for Roth conversions and could have a positive impact on IRMAA charges, as some retirees may see lower MAGI due to reduced taxable Social Security income."
What Happens Next
The bill will need to proceed through committee reviews in the Senate before potentially reaching the floor for a vote. Meanwhile, Senators Marshall and Blackburn are actively working on several other legislative efforts.
Senator Marshall has worked with colleagues to introduce bills to cut regulatory red tape for grocery stores and alleviate small business burdens. Senator Blackburn has introduced the DOGE Acts to improve government efficiency and reduce wasteful spending, as well as worked with colleagues on the Protecting Our Supreme Court Justices Act to increase penalties for threats against justices.
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