(The opinions expressed here are those of the author, a columnist for Reuters.)

It is one of those unwelcome surprises that is almost guaranteed to anger people when they retire: income from Social Security benefits is subject to federal taxes - and in some cases, to state taxes as well.

So it is not a shock to see Republican presidential candidate Donald Trump dangling elimination of the tax as a possible enticement to voters this summer.

Reducing or eliminating the tax on benefits enjoys bipartisan support in Congress, and Democrats also have proposed variations on the idea. But unlike Trump, they have proposed ways to pay for the tax cuts, which would cost Social Security and Medicare $1.5 trillion in revenue over the coming decade.

Social Security already faces a solvency problem. The latest estimate from the trustees who oversee Social Security shows that the combined retirement and disability trust fund reserves

will be depleted in 2035. At that point, the program would be bringing in enough cash to pay only 83% of the benefits promised to current and future beneficiaries. That would be the equivalent of a 17% across-the-board cut in benefits.

Revenue from the tax on benefits helps fund Social Security and Medicare Part A (hospitalization); eliminating the tax without paying for it would hasten Social Security’s insolvency by as much as two years (to 2033), and as much as six years for the Medicare Part A trust fund (to 2030 instead of 2037), according to the Tax Foundation.

Averting trust-fund exhaustion is job one when it comes to Social Security reform. A report by the Urban Institute found that allowing the trust fund to run dry would increase the number of beneficiaries living in poverty by more than 50%, with a disproportionate impact on people of color. Meanwhile, eliminating the benefits tax would help only middle- and higher-income seniors, due to the way the tax is structured.

HOW THE TAX WORKS

Social Security benefits were first taxed in 1984 as part of a comprehensive Social Security reform package signed into law the previous year aimed at stabilizing the program’s finances. The most important part of that reform was the gradual lifting of the full retirement age to 67 from 65. But taxes collected on benefits played a supporting role, since the taxes levied are credited to the Social Security and Medicare trust funds. In the case of Social Security, the tax currently accounts for about 4% of trust fund revenue.

The tax uses a unique, complicated formula that at first impacted only higher-income beneficiaries. But the tax was crafted to slowly phase in over time to impact more people. Social Security benefits are indexed to wage growth and adjusted for inflation, but the income-threshold levels used to determine the taxable amount of Social Security benefits are not indexed for wage growth or inflation.

Here’s how it works. First, you determine a figure Social Security calls combined income (also sometimes called provisional income). This amount is equal to your modified adjusted gross income (MAGI) plus nonexempt interest plus 50% of your Social Security benefits. For most taxpayers, MAGI consists of everything in adjusted gross income except the taxable portion of Social Security benefits.

No taxes are paid by beneficiaries with combined income equal to or below $25,000 for single filers and $32,000 for joint filers. Beneficiaries in the next tier of income - between $25,000 and $34,000 for single filers and between $32,000 and $44,000 for married couples filing jointly - pay taxes on up to 50% of their benefits. Beneficiaries with income above those levels pay taxes on up to 85% of benefits.

Taxing Social Security income is consistent with the tax treatment of other types of retirement income, including pensions and 401(k) accounts - the tax liability of participants is deferred until the income actually is received.

But that doesn’t cut it with affected retirees - who may qualify as “higher income” for purposes of the income tax bracket, but are not wealthy by any real-world standard. “You can explain the policy to people, but it’s one of those things people have a real visceral dislike for," said Nancy Altman, president of Social Security Works, a progressive advocacy group.

Confusing matters further, the states are all over the map when it comes to taxation of retirement income. Many also exempt or limit taxation of pensions.

Only eight states tax Social Security income. Notably, Minnesota Governor Tim Walz, who is now the running mate of Democratic presidential candidate Kamala Harris, signed legislation last year that exempted most retirees from the tax.

At the federal level, any repeal or limits on taxation of Social Security benefits should be coupled with a broader reform package that restores solvency and expands benefits. For example, Social Security 2100, a bill in Congress that is sponsored by Representative John Larson, includes an across-the-board benefit hike of 2%, a more generous annual cost-of-living adjustment, and a variety of targeted increases for lower-income seniors.

It would also allow Social Security to continue paying full benefits for an additional 32 years, according to an analysis by the program’s actuaries. The bill pays for all that by applying the federal payroll tax to earnings over $400,000 and adding a new tax on investment income for high-income taxpayers.

But the legislation also exempts more beneficiaries from paying taxes on their benefits by creating a single set of thresholds ($35,000 and $50,000 for single and joint filers, respectively), for taxing up to 85% of benefits, through 2034; starting in 2035, taxation thresholds would revert to the current levels.

The bottom line: if we are going to cut taxes for higher-income seniors, the change should be coupled with other Social Security reforms that provide help across the board.

(The opinions expressed are those of the author, a columnist for Reuters)

(Writing by Mark Miller Editing by Matthew Lewis)