Myths About Taxes, Social Security, and Benefits
Key takeaways
- Social Security's trust funds are invested in special Treasury bonds by law, so Congress did not raid them, though the bonds must be repaid from general revenue.
- Members of Congress have paid Social Security taxes and received benefits on the same terms as other workers since 1984.
- Social Security will not disappear, but its trust funds are projected to run short in the early 2030s, after which taxes would cover about 80 percent of benefits unless Congress acts.
- About 40 percent of households owe no federal income tax in a given year, but most of them pay payroll, sales, and other taxes.
- Immigrants without legal status are barred from most federal benefits, and many pay taxes, including into Social Security.
- Moving into a higher tax bracket taxes only the income above the threshold, though losing benefits can create real cliffs.
Claims about taxes and benefits spread widely, often mixing truth and error. This guide checks six of the most common against the law and official data.
Each answer explains what is true, what is not, and where reasonable people disagree.
No. Social Security is funded mainly by ongoing payroll taxes, not just the trust funds. The 2026 trustees report projected the retirement trust fund would be depleted in late 2032 and the combined funds in 2034, after which incoming taxes would still pay about 78 to 83 percent of scheduled benefits. That would be a sharp cut, so Congress is likely to act, through higher taxes, slower benefit growth, or both, as it did in 1983.
Partly true for one tax only. In a typical year about 40 percent of households owe no federal income tax, mostly because of low incomes, retirement, or credits for children and work. But most of them pay Social Security and Medicare payroll taxes, along with state and local sales, gas, and property taxes. For most workers, payroll taxes are larger than income taxes, and the top 10 percent of earners pay about 70 percent of federal income taxes.
Yes. The 1983 Social Security amendments required members of Congress, the President, federal judges, and newly hired federal employees to pay Social Security taxes starting in 1984, and they receive benefits on the same terms as everyone else. Members also have a federal pension through the same system as other federal workers, FERS, which pays more than Social Security alone but is not unusually generous for long-serving federal employees.
Mostly no. Immigrants without legal status cannot receive Social Security, SNAP, nonemergency Medicaid, ACA subsidies, or most other federal benefits, and the 2025 budget law further limited benefits for many lawfully present immigrants. Hospitals must treat emergencies, and children born in the United States are citizens who may qualify for aid. Many immigrants without legal status pay taxes using individual taxpayer numbers or work under others' numbers, contributing billions of dollars a year to Social Security that they cannot collect.
Not because of tax brackets. Federal income tax rates are marginal, so a higher rate applies only to the income above each bracket's threshold, and a raise always increases after-tax pay from income taxes alone. However, benefit cliffs are real: a raise can cost a family more in lost Medicaid, SNAP, child care help, or ACA subsidies than it gains in pay, a problem that experts across the spectrum have urged Congress and states to smooth out.
No, though the claim reflects how the system works. By law since the 1930s, any Social Security taxes not needed to pay current benefits must be invested in special-issue Treasury bonds that earn interest. The Treasury spends that cash like other revenue, which is why critics call it a raid, but the bonds are legal obligations backed by the full faith and credit of the United States and have always been repaid. The real issue is that redeeming them requires the rest of the budget to raise taxes, borrow, or cut spending.
See how Social Security works in how Social Security benefits work and its financing in Social Security and Medicare financing, or more myths in myths about Congress, courts, and money.