Comparison with External Estimates

Having presented our microsimulation results, we can now compare them with estimates from major analytical organizations. This chapter examines how the Congressional Budget Office (CBO), Social Security Trustees, and Tax Foundation have estimated the budgetary impacts of similar Social Security benefit taxation reforms.

Our Estimates Summary¶

Option 1: Full Repeal of Social Security Benefits Taxation¶

10-Year Impact (2026-2035): -$1,491.2 billion (static)

Option 2: Taxation of 85% of Social Security Benefits¶

10-Year Impact (2026-2035): $435.0 billion (static)

Option 3: 85% Taxation with Permanent Senior Deduction Extension¶

10-Year Impact (2026-2035): $187.2 billion (static)

Option 4: Social Security Tax Credit System ($500)¶

10-Year Impact (2026-2035): $248.1 billion (static)

Option 5: Roth-Style Swap¶

10-Year Impact (2026-2035): $767.6 billion (static)

Option 6: Phased Roth-Style Swap¶

10-Year Impact (2026-2035): $1,314.3 billion (static)

Option 7: Eliminate Bonus Senior Deduction¶

10-Year Impact (2026-2035): $72.1 billion (static)

Option 8: 100% Taxation of Social Security Benefits¶

10-Year Impact (2026-2035): $889.4 billion (static)

Full Repeal of Social Security Benefit Taxation (Option 1)¶

Several organizations have analyzed the budgetary impact of completely eliminating the taxation of Social Security benefits. These estimates vary based on methodology, data sources, and projection periods.

Important Note: These estimates were produced before the passage of the One Big Beautiful Bill, which, amoung several individual income tax provisions, includes a temporary $6,000 bonus senior deduction (2025-2028). This new deduction reduces the baseline revenue from Social Security benefit taxation, which affects the cost estimates of full repeal.

The following table compares 10-year revenue loss estimates from major analytical organizations for completely eliminating Social Security benefit taxation:

The Congressional Budget Office regularly provides estimates for changes to Social Security benefit taxation as part of their Options for Reducing the Deficit series. The Social Security Board of Trustees provides detailed projections of the impact of benefit taxation on trust fund solvency in their annual report. The Tax Foundation analyzed Trump’s proposal to eliminate Social Security benefit taxation using their Taxes and Growth model, noting that their estimate uses Congressional Budget Office (CBO) forecasts for taxable Social Security benefits, which may differ from the assumptions used by the Social Security trustees.

Expanded Benefit Taxation (Options 2 and 8)¶

The Joint Committee on Taxation provides relevant context for understanding the revenue potential of taxing Social Security benefits more comprehensively:

The JCT estimate of $318.4 billion represents forgone revenue over a **5-year period (2024-2028)**, while our estimates are over a **10-year period (2026-2035)**. The JCT figure represents approximately$63.7 billion annually in revenue loss from the current partial exclusion of Social Security benefits from taxation.

CBO has also analyzed a different proposal to “Tax Social Security and Railroad Retirement Benefits in the Same Way That Distributions From Defined Benefit Pensions Are Taxed,” which would establish a basis recovery system and generated an estimated $458.7 billion over 2021-2030 (Congressional Budget Office (2024)).

These differences highlight the importance of clearly specifying reform parameters and baseline assumptions when comparing estimates across organizations.

Bonus Senior Deduction¶

The following table compares estimates for the bonus senior deduction’s fiscal impact:

The Joint Committee on Taxation estimated the revenue impact of the bonus senior deduction included in the One Big Beautiful Bill Act Joint Committee on Taxation (2025). The JCT projects that the $6,000 bonus senior deduction for taxpayers aged 65 and older will reduce federal revenues by$66.3 billion over the ten fiscal years from 2025 through 2034.

Our Option 7 analysis shows that eliminating this deduction would save $72.1 billion from 2026-2035 (the deduction expires at the end of 2028 under current law, with the main impact occurring 2026-2028). Our estimate is slightly higher than JCT’s because we include the full 10-year window, though the revenue impact after 2028 is minimal.

Key Comparisons and Context¶

Our estimate of $1.491 trillion for full repeal falls within the range of prior estimates from major analytical organizations, as shown in the table above. Direct comparison is complicated by:

• Baseline Differences: The One Big Beautiful Bill’s temporary senior deduction (2025-2028) was not included in these prior estimates, affecting baseline comparisons

• Time Period: Our analysis covers 2026-2035, while prior estimates cover 2025-2034

• Methodological Alignment: Our use of PolicyEngine’s microsimulation model follows similar approaches to CBO and JCT

• Trust Fund Impacts: While we focus on general revenue impacts, CRFB’s analysis highlights the significant effects on Social Security and Medicare trust fund solvency

These external estimates serve as useful validation points. While our estimates for some reforms (like full repeal) align closely with other organizations, differences in other areas (like the 85% taxation option) highlight the importance of understanding baseline assumptions and reform specifications when comparing analyses.