Finance
Trump’s Social Security tax break could make two fragile safety nets even weaker
Donald Trump’s call to exempt Social Security benefits from income taxes may offer an alluring political sound bite.
But the move would undermine not just one critical safety net for seniors, but two.
Trump’s plan is expected to exhaust the reserve funds for both Social Security and Medicare faster than anticipated, according to tax policy experts.
That would saddle seniors with an even bigger cut in Social Security benefits than currently estimated and throw a healthcare program that covers 67 million into chaos. Taxes on Social Security payouts help fund Medicare’s hospital coverage.
The plan would also add $1.6 trillion over 10 years to the country’s budget deficit with few economic gains, these experts said.
“It’s not setting the entitlements up for success and it’s not putting our budget in a good position,” Garrett Watson, a senior policy analyst and modeling manager at the nonpartisan Tax Foundation, told Yahoo Finance.
The proposal has both the Tax Foundation and the Center for American Progress, which often are on opposite sides of tax policy, warning of the potential consequences.
“If smart analysts on the left and smart analysts on the right of the tax policy don’t think it’s a good idea, that certainly tells you something,” Brendan Duke, senior director for economic policy at the left-leaning Center for American Progress Action Fund, told Yahoo Finance.
“It’s probably not a good idea.”
‘Bottom half are losers’
Trump, the Republican presidential candidate, first floated the idea late last month at a rally in Harrisburg, Pa., vowing that “seniors should not pay taxes on Social Security and they won’t,” without offering further details.
On Wednesday, Trump stood by a banner that read “No tax on Social Security” at a campaign rally in Asheville, N.C., calling the tax a “cruel double taxation.”
As it stands now, about 40% of seniors must pay federal income taxes on their Social Security benefits. The tax is progressive, meaning those with the lowest incomes aren’t taxed, while wealthier seniors with substantial income outside of their benefits are.
Exempting benefits from income taxes would provide an effective 44% benefit increase for seniors with the highest incomes, a 6% increase for middle-income ones, and no increase for most in the bottom half, according to Marc Goldwein, a senior policy director for the Committee for a Responsible Federal Budget.
That’s before Social Security runs into trouble.
The tax seniors pay on their Social Security benefits also goes directly into funding the trust fund that supports the social program. Eliminating those taxes accelerates when the reserves for Social Security run out.
Currently, Social Security’s reserves are expected to be exhausted by 2035, at which point benefits will get cut by 21%. If Trump’s proposal is enacted, those reserves are estimated to run dry by 2033 and benefits would be slashed by 25%.
Even with the benefits cut, wealthier seniors come out slightly ahead with the tax break, pocketing a 9% increase, per Goldwein.
That’s not the case for lower-earning Social Security beneficiaries who would see their benefits reduced by a quarter with no tax break.
“The bottom half are losers,” Watson said.
Overall, the plan would water down what is considered the biggest anti-poverty program in the United States.
“There is no world where this does not increase the elderly poverty rate,” Duke said.
‘That’s actually pretty scary’
Trump’s plan would also empty out the reserves that Medicare uses for hospital coverage — known as Medicare Part A — sooner than anticipated.
Right now, that fund is expected to run out in 2036. That moves up to 2030 under Trump’s plan, according to Watson.
The Medicare trustees have said the fund’s insolvency could first cause delays in payments to health plans and providers of hospital services. Additionally, seniors’ “access to health care services could rapidly be curtailed.”
“Nobody actually knows what happens when Medicare runs out of money,” Duke said. “And that’s actually pretty scary.”
‘Mechanically add to the budget deficit’
The implications for the federal deficit are also sizable.
Not taxing seniors’ benefits means $1.6 trillion in total revenue would not go to the trust funds that support Social Security and Medicare from 2024 to 2033, according to calculations using data from the most recent Social Security and Medicare trustees reports.
“This would mechanically add to the budget deficit and go in the wrong direction in solving that problem,” Watson added.
There would be very little economic return from the proposal, too, Watson found.
The country’s long-run gross domestic product would increase by 0.1%, while the economy would add around 64,000 full-time jobs. Wages would tick up by less than 0.05%.
“The intent [of the proposal] is trying to protect seniors who are operating on fixed incomes from inflation and provide more relief by not taxing it,” Watson said. “But if it’s done without offsets, it weakens the very entitlements they’re trying to protect.”
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Janna Herron is a Senior Columnist at Yahoo Finance. Follow her on X @JannaHerron.
For a company navigating one of the most consequential transformations in its history, financial clarity is not optional—it is essential. Natura &Co, the Brazilian personal care and cosmetics group behind iconic brands such as Natura and Avon, has long been committed to combining purpose-driven business with commercial performance. After a period of strategic portfolio reshaping, including the divestiture of its Aesop and The Body Shop holdings, the company is now sharpening its focus on profitability and operational excellence across Latin America and global markets.
At the center of that effort sits a deceptively complex challenge: understanding, in real time, which revenue and cost factors are driving or eroding gross margin across a highly diversified business. For years, answering that question meant manual reporting, delayed insights, and finance teams spending valuable time on data gathering rather than analysis.
That’s now changing, thanks to a co-innovation initiative developed together with SAP and Numen, a global SAP partner specializing in digital transformation and enterprise software implementation.
From manual reporting to proactive decision intelligence
The project’s goal was to replace a labor-intensive gross margin analysis process with a generative AI application embedded directly into Natura &Co’s financial workflows. Built on SAP Business AI Platform, SAP’s unified foundation integrating business technology, data, and AI capabilities, the application connects directly to data in SAP S/4HANA to provide finance teams with automated insights and narrative recommendations in real time, without the need for manual data pulls or offline reporting.
The application enables users to explore revenue, cost, and margin drivers interactively, identifying at a glance which elements are protecting or eroding margin performance across markets and product lines. Crucially, human oversight remains central to the design: the AI application generates insights, while finance professionals retain full control over interpretation and decisions.
“The implementation of gross margin analysis using AI in SAP S/4HANA marked an inflection point in the analytical capability of our finance area,” said Rogério Dias Garcia, tech manager, ERP Latam, Natura &Co. “We overcame delays and raised the standard of insights by integrating margin analysis from SAP S/4HANA with a large language model connected via the SAP AI Core layer. This architecture allowed us to provide, in an agile, secure, and completely anonymous manner, a stratified and precise view of gross margin offenders and protectors—discriminating exactly which revenue or cost elements were driving market performance.”
A collaborative architecture for scalable AI adoption
Natura &Co’s application derived from a prototype SAP partner Numen created in early 2024 at SAP’s global Hack2Build on business AI, leveraging the generative AI capabilities of SAP Business AI Platform. The solution was designed and developed through close collaboration between Natura &Co, Numen, and SAP. From the outset, the approach was to align AI adoption with concrete business priorities, ensuring the application would be scalable and production-ready rather than a standalone prototype.
Numen brought deep SAP implementation expertise to the project, combining knowledge of SAP S/4HANA architecture with hands-on experience in building solutions on SAP Business AI Platform. The technology stack—SAP S/4HANA, SAP AI Core, SAP Fiori, and SAP Business Technology Platform—provided the secure, integrated foundation needed to connect financial data with generative AI capabilities in an enterprise context.
“SAP enabled the transformation by providing the technological foundation and expert support,” said Carlos Aravechia, head of Data Design & Intelligence at Numen.
The success of the project has validated a broader conviction at Natura &Co: that generative AI, embedded directly in ERP workflows, can fundamentally reposition finance from a transactional function to a strategic business partner.
A blueprint for other businesses
The Natura &Co project demonstrates a pattern that other organizations can replicate, particularly those running SAP S/4HANA. The combination of structured ERP data with the contextual reasoning capabilities of large language models creates a foundation for decision intelligence that goes well beyond traditional business intelligence tools.
The project was built within a six-month co-innovation sprint and went live in August 2025. It is currently in use across Natura &Co’s Equador operations.
Looking ahead, Natura &Co is already planning the next phase: integrating Joule Agents to further automate the extraction of standard analytical content and deepen the AI-driven optimization of financial processes.
“The success of this initiative validates the transformative potential of embedded AI within our ERP,” Dias Garcia noted. “We are now ready to move forward—deepening these insights and integrating the capability of Joule Agents to maximize the extraction of standard content and further optimize our business decisions.”
For SAP customers evaluating how to move from AI experimentation to AI in production, the Natura &Co project offers a concrete, replicable model: start with a high-value, well-defined business process, embed AI directly into existing workflows, and build in human oversight from the start.
A girl from a disadvantaged rural family in central China topped this year’s gaokao, attracting numerous live-streamers eager to finance her education, which she declined.
The home of 18-year-old secondary school graduate Han Yaping in a Henan province village was recently bustling with live-streamers.
This attention came after Han achieved an impressive score of 699 out of 750 in the gaokao, China’s national college entrance exam.
She has received offers from China’s two leading universities, Tsinghua University and Peking University.
Han’s accomplishment is particularly remarkable given her family’s impoverished circumstances.
Her mother suffers from ankylosing spondylitis, an inflammatory arthritis affecting the spine, preventing her from working. Her father, who earns a living through farming and odd jobs, serves as the family’s sole provider. Han also has a younger sister.
The UK’s Financial Conduct Authority (FCA) published a landmark review on Monday that proposes recommendations to regulate the impact of artificial intelligence (AI) on the financial decisions made by consumers.
The review, titled the Mills Review, anticipates that both consumers and firms will start delegating “more financial decision-making to AI systems,” including for agreements, initiating transactions, and executing decisions “within agreed parameters.” One of the key findings of the review outlined that while AI can help bridge advice gaps and “support growth,” there remain risks “associated with fraud, cyber security, and consumer harm.” Conducting the review, Sheldon Mills highlighted that “AI can also amplify risks: bias, discrimination, exclusion, opaque decision-making (particularly when multiple AI models interact), misleading or hallucinatory advice and erosion of consumer trust.”
The review stated that presently, one in five adults in the UK are “already open to AI making decisions for them,” particularly when decisions feel “complex or high stakes.” It found that roughly 26 percent of the population “trust general-purpose tools such as ChatGPT, Claude or Gemini for financial advice” with little awareness that such platforms provide no “formal routes to recourse” or protections.
Overall, the Mills Review identified four areas that it anticipates will be impacted by AI in the financial sector: “the transformation of firms,” “new consumer journeys,” “a reshaped competition landscape,” and “amplified financial crime and cyber risk.” The FCA projected the shift in how consumers and firms consult AI to take place by 2030.
The Mills Review put forth seven “priority” recommendations to be considered by the FCA Board. It recommended that any transitions to autonomous AI models be monitored and that regulatory frameworks and perimeters be adapted and secured. The review called for the strengthening of “system-wide coordination and oversight,” the scaling up of the FCA’s AI Lab to enable it to support AI models and innovation for agentic finance, and an “AI-enabled agentic supervisory model” to be built and adopted. Finally, it recommended that a trusted “public-interest AI-enabled financial capability service” be developed.
The FCA announced, in the press release, that it will launch an AI “good and poor practice publication” in late 2026.
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