Study: Tweaking tax on Social Security benefits could boost economy, jobs

However, scholars for the group noted that simply eliminating that break would lead to higher taxes on the elderly and a new tax on retirement savings that should be exempted from taxation. A "more generous" middle ground Congress could pursue in any tax overhaul effort could allow the tax break up to a certain amount of benefits, and anything above and beyond that would be considered taxable income. Currently, Social Security benefits are taxed based on the income of the recipient, not the amount of benefits obtained.

The study is the latest in a series from the group, which comes as both chambers are knee-deep in efforts to craft a comprehensive tax reform package, with leaders in both parties saying they are looking at everything in the code as part of that effort.

The Foundation claims in its study that eliminating the exclusion on Social Security benefits would have a minimal impact on the economy, unless the new revenue brought in by the tax hike were used to lower income tax rates across the board. Doing so would eliminate any added revenue for the government to tackle the deficit but boost the nation's gross domestic product by $30 billion, the study claimed.