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.
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.
Finance
Fayette County Public Schools Board of Education approves audit contract, new finance director position
LEXINGTON, Ky. (WKYT) – The Fayette County Public Schools Board of Education approved a one-year audit contract capped at $131,750 plus $225 per hour during a virtual meeting Monday, along with a new finance director job description.
The contract is with Mauldin & Jenkins Certified Public Accountants, an Atlanta-based firm, and covers the 2025-26 fiscal year and the restatement of the 2024-25 fiscal year and ancillary services through FY 2029-2030. The work is set to be completed by Nov. 15.
The board approved the contract in a 5-0 vote.
Audit contract details
Interim Chief Financial Officer Kyna Koch said the cost is already accounted for in the district’s budget.
“And is actually less than we expected given our current situation — we were thrilled with the bid,” Koch said.
Koch said she believes this is Mauldin & Jenkins’ first school district audit in Kentucky, but that the firm works with school districts of more than 100,000 students throughout the Southeast.
“Quite frankly when I spoke to the folks at KDE they were thrilled because we’re running kind of short of auditors who want to do school district audits — so all around I think this was a win-win for everyone,” Koch said.
New finance director position
The board also approved a new job description for the position of Director of Finance. Acting Superintendent Dr. Bill Bradford said the title will replace two associate director positions.
“Which will not only save the school district money but it’s also going to streamline our work and align internal controls to make room for a more efficient unit,” Bradford said.
Koch said the position will be posted as soon as possible following the board’s approval.
Closed session
The board went into closed session for more than an hour to discuss pending investigations that could lead to employee discipline. When the board returned, it took no action and adjourned the meeting.
Copyright 2026 WKYT. All rights reserved.
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