The approval of the One Big Beautiful Bill Act on July 3, 2025, has not only redesigned the U.S. tax system but also brought significant changes for Social Security recipients. The act introduces several provisions aimed at providing relief to retirees while addressing the sustainability of the program for future generations.
Key Provisions of the One Big Beautiful Bill Act for Social Security
One of the key provisions of the act is a new tax exemption for low- and middle-income retirees. Starting in 2025, a $6,000 deduction will be available for individuals over 65, lasting until 2028. This will benefit approximately 88 percent of the 51.4 million Social Security recipients. However, the deduction will start to phase out for incomes above $75,000 (or $150,000 for couples). While this provides relief for many, it does not eliminate taxes on benefits, as was promised by former President Trump. Moreover, it does not fully resolve Social Security’s projected insolvency by 2033, which remains a concern.
Criticisms and Concerns
Critics argue that the $6,000 deduction could reduce tax revenues, potentially accelerating the depletion of Social Security funds to 2032 instead of the previously estimated 2033. While the measure benefits middle- and upper-income retirees, it does not offer relief for the lowest-income retirees. This could lead to increased disparities among Social Security recipients, with the wealthiest retirees receiving more benefits than the poorest.
The Impact on Retirees and Future Beneficiaries
The One Big Beautiful Bill Act is expected to result in net increases in annual benefits for more than 20 million older people by helping them avoid the tax burden on their Social Security payments. Additionally, the law removes penalties for continuing to work past the age of retirement, which allows retirees to increase their income without the fear of losing benefits.
COLA Formula Revision
The revised Cost-of-Living Adjustment (COLA) formula also addresses concerns that previous adjustments did not accurately reflect the true inflation that retirees face. This change is expected to provide more meaningful increases in benefits for Social Security recipients, ensuring that their purchasing power better matches the cost of living.
Ongoing Debate Over Social Security’s Future
Despite these positive changes, the debate continues regarding the long-term sustainability of the Social Security program. Critics of the new law argue that it could worsen the system’s financial situation, especially if the $6,000 deduction and other provisions lead to a reduction in tax revenues. Others are concerned about the funding mechanisms, including the controversial financial transactions tax, which Republicans claim will not affect ordinary investors but will apply to transactions over $1 million.
The One Big Beautiful Bill represents one of the most significant adjustments to Social Security in decades, providing concrete relief for millions of retirees. However, as its full implementation will take time, reactions to the law remain mixed. Some see it as a step in the right direction for the viability of Social Security, while others are concerned about its long-term funding and fairness.
