Social Security and Medicare: Why "Tax Relief" Without Fair Funding Puts Retirees at Risk

On July 3rd, the Social Security Administration announced that nearly 90% of Social Security recipients will no longer pay federal income taxes on their benefits. At first glance, this sounds like a well-deserved break for retirees living on fixed incomes. But many advocates and financial experts are warning that what’s being framed as “tax relief” could actually be a Trojan Horse—and that the real cost could fall on tomorrow’s retirees.

The reason? This change wasn’t paired with any reform to ensure the ultra-wealthy or high-income earners contribute more. The taxes that beneficiaries pay on Social Security income—typically for those earning over a certain amount—go directly back into the Social Security Trust Fund. Removing those taxes without a plan to replace the lost revenue means billions of dollars less going into the program each year.

In fact, some of the country’s highest earners still don’t pay Social Security taxes on the majority of their income at all. Social Security is primarily funded through payroll taxes, which are only collected on the first $168,600 of a person’s earnings (as of 2024). That means someone making $1 million a year pays the same amount into Social Security as someone making $168,600. The rest of their income—whether in the form of salary, bonuses, stock options, or investment income—is untouched.

This outdated income cap is one of the biggest structural problems facing Social Security. And yet, instead of fixing it by asking the wealthiest Americans to pay a bit more, recent policy changes have removed funding from the other end—by eliminating taxes on benefits for middle-income retirees.

It’s a one-two punch: reduce contributions from those who can afford to pay the most, and cut off a revenue stream from those already contributing their fair share.

This new tax change will most likely accelerate the timeline for Social Security’s shortfall, which is currently projected to hit in 2033. Without additional funding, the program would only be able to pay about 77% of promised benefits after that date. And with this new policy, that cliff could arrive even sooner. That means current and future Social Security recipients will have an automatic 23% cut in benefits starting in 2033. 

On its face, this policy may seem helpful. But viewed in full context, it is actually laying the groundwork for much deeper cuts to Social Security and Medicare. So is this really about relief for seniors—or is it a strategy to starve the system, then say it’s broken and cut it?

Once the Trust Fund gets closer to insolvency, some policymakers will claim they have “no choice” but to:

• Cut monthly benefits
• Raise the retirement age
• Limit eligibility
• Or shift to private accounts

That would fundamentally change what Social Security is: a guaranteed benefit for all working Americans, based on lifetime contributions—not an investment scheme with personal risk.

These concerns apply just as much to Medicare. That program also relies on payroll contributions and trust funds, and faces its own funding pressure. Cuts to Medicare taxes, or failure to modernize how it’s funded, could lead to similar instability.

Medicare, like Social Security, is a core promise to American seniors. Weakening its funding puts health coverage, hospital access, and prescription affordability at risk for tens of millions of people.

There are ways to stabilize these programs and make them stronger for the long term—without cutting benefits or raising the retirement age. The most effective and popular solution? Make the ultra-wealthy pay their fair share.

A few ideas with strong public support:

• Lift or eliminate the income cap on Social Security taxes, so people earning millions each year contribute proportionately
• Apply Social Security taxes to unearned income, such as stock dividends or capital gains, above a certain threshold
• Create a modest surtax on extremely high earners to protect Medicare and Social Security solvency

These solutions wouldn’t affect everyday workers or retirees. But they would rebalance a system that currently favors the wealthy—who often need these programs the least.

What many retirees and workers fear is that this new policy is the beginning of a manufactured crisis. Instead of responsibly funding the program, this “relief” removes resources and sets the stage for future claims that Social Security and Medicare are unsustainable.

But make no mistake: these are not optional programs. They are earned benefits that workers have paid into over a lifetime. Weakening them by starving their funding—while protecting the wealth of those at the top—betrays that promise.

With Congress set to return to session, we urge everyone to pay attention. Whether you're collecting benefits now or just starting your career, the decisions being made today will affect all of us. Speak with your elected officials. Ask them: What are you doing to make sure the wealthy contribute fairly to Social Security and Medicare?

Because relief that leads to collapse isn’t relief at all—and protecting these programs means ensuring everyone, especially the wealthiest among us, does their part.


What Does the Social Security Fairness Act Mean for You? 

1. Full Social Security Benefits for Non-Teaching Work
If you worked in jobs outside of teaching where you paid into Social Security, you are now eligible to receive the full benefits you earned—no longer reduced by the WEP.

2. Spousal or Survivor Benefits
If you qualify for Social Security spousal or survivor benefits, these will no longer be reduced by two-thirds of your TRS pension. This change could result in a significant boost to your income.

3. Retroactive Payments
The repeal includes retroactive payments for benefits withheld during 2024 due to WEP or GPO. You may receive a lump sum for these amounts; however, the exact timing for such payments is still being determined.

Next Steps for Retirees

1. Contact the Social Security Administration (SSA):
   Update your work history and confirm your eligibility for benefits.

2. Monitor Updates:
   SSA will begin recalculating benefits for those affected. Be prepared to provide additional documentation if requested.

3. Seek Professional Guidance:
   Consider consulting a financial advisor who specializes in retirement benefits to ensure you’re maximizing your income. As a reminder, the Retiree Team cannot provide you with specific guidance. 

APRIL 2025: Attorney General Tong Leads Brief to Defend Social Security from Erratic and Unlawful Mismanagement

(Hartford, CT) – Attorney General William Tong led a coalition of 20 states filing an amicus brief supporting an injunction to block erratic and unlawful layoffs and mismanagement at the Social Security Administration by acting administrator Leland Dudek and the Department of Government Efficiency that jeopardize continued payments for millions of Americans.

The brief supports the plaintiffs in American Association of People with Disabilities v. Dudek and was filed Tuesday in the United States District Court for the District of Columbia.

“Do not mess with Social Security. Period,” said Attorney General Tong. “This is not some tech start-up for hacker bros to play with. This is our country’s most fundamental economic lifeline, and without it, millions and millions of Americans will go hungry and homeless. The courts must step in now to block Elon Musk and his band of wannabee stormtroopers from dismantling Social Security before it is too late.”

Millions of Americans receive monthly benefits through Social Security retirement, survivor, and disability benefits. As Dudek and DOGE inflict Silicon Valley’s move-fast-and-break-things approach, workers have reported utter chaos that has threatened to send the agency into a death spiral. Announcements have been made only to be rolled backs days or even hours later. Offices have been slated for closure only to later be removed from lists. Indiscriminate layoffs have been done without regard for how the cuts will impact SSA’s ability to provide core services. All the while, Dudek and DOGE have failed to offer any coherent justification for their erratic actions, pointing instead to misinformation about debunked purported fraud, waste, and abuse.

Elon Musk has falsely claimed that SSA pays out $100 billion annually in improper payments, referring to SSA as a “Ponzi scheme.” President Donald Trump has falsely insisted that tens of millions of people over 100 years old were receiving Social Security checks. This is false. Less than 1 percent of total benefits paid between 2015 and 2022 were improper, according to the SSA’s Inspector General’s Office. Of those improper payments, most were due to mistakes or delays, rather than false information to obtain undeserved benefits. Dudek himself has rejected the notion that deceased people are receiving benefits.

Staff cuts are exacerbating Social Security’s problems, rather than improving its efficiency. About 2,800 employees have already retired or taken early buyouts promoted by DOGE. SSA and DOGE are planning even further cuts, despite administrative costs only amounting to 0.5 percent of its budget. Having fewer workers has led to longer lines at field offices and longer wait times on phones. In 2025, callers have waited 50 percent longer on hold before speaking to a representative. Online users are faring no better after several website crashes. The Office of Transformation, responsible for managing the website, is in the midst of laying off roughly half of its information technology staff.

For many Americans, Social Security benefits make it possible to meet their most basic needs, including food, shelter, and health care. Further, Social Security is the pathway for eligibility for a number of other vital safety net programs, including Medicaid and Medicare and Supplemental Nutrition Assistance.

In a recent survey by the National Academy of Social Insurance, 42% of individuals aged 65 and older responded that they would not be able to afford food, clothing, or housing if they did not receive their Social Security retirement benefits. Nearly nine out of ten people aged 65 and older were receiving a Social Security benefit as of December 31, 2024. Of those people, approximately 40% received at least half of their income from Social Security. Further, 12% of men and 15% of women rely on Social Security for 90% or more of their income.

Plaintiffs claim the staffing cuts and reorganization measures have delayed benefits and limited SSA’s ability to meet the needs of beneficiaries with disabilities in violation of section 504(a) of the Rehabilitation Act of 1973, the Administrative Procedure Act, and the First and Fifth Amendments. The brief supports their request for a preliminary injunction.

Joining Attorney General Tong in the brief are the attorneys general of Arizona, California, Colorado, Delaware, the District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, and Washington.

SOCIAL SECURITY FAIRNESS ACT SIGNED INTO LAW

After years of relentless advocacy and dedication by retirees and workers nationwide, including our very own Council 400 members, the Social Security Fairness Act was signed into law by President Biden on Sunday, January 5th. This landmark legislation repeals the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO), long-standing provisions that unfairly reduced or eliminated Social Security benefits for retirees receiving pensions from non-Social Security-covered employment, such as the Connecticut Teachers’ Retirement System (TRS).

This victory would not have been possible without the unwavering commitment of Bette Marafino, President of the Connecticut Alliance for Retired Americans (CT ARA). Bette’s work was honored with the opportunity to introduce President Biden ahead of this historic signing. Our heartfelt thanks also go to Win Heimer, Vice President of CT ARA, and Amelia Smith, CSEA Council 400 Liaison to CT ARA, for their tireless efforts in championing this cause. The CSEA Council 400 Retirees have supported this initiative for many years, and we are overjoyed to see it finally come to fruition.

This historic development restores fairness to retirees who contributed to both public pensions and Social Security. We’ll continue to share updates as more details become available.

Congratulations again to everyone who played a part in making this happen—it’s a monumental step forward for retirees across the nation!

WATCH THE EVENT HERE