it is legal because under Article 1 Section 8 Clause 1, The very first power given to Congress by the US Constitution which is the power to tax and Money is power and the bases for the Social Security Act of 1935 which is Congress's Power to Tax under the US Constitution and why Social Security is no different than any different Federal Government Program that can be altered or eliminated at anytime which is what the SCOTUS confirmed in 1960 in Flemming V. Nestor.If it's a tax to begin with, why & how is it legal to tax it when it is disbursed?
I believe that this question made it to the SCOTUS but I lack clarity on that.
Article 1, Section 8
Clause 1. The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;
The very first power given to Congress by the Constitution is the power to tax. Money is power, and in the governmental structure created by the Constitution, Congressnot the presidentcontrols the money. Congress also has the power to levy tariffs (taxes on imported goods) but it's not allowed to charge more for imports into one state than into another. The Framers of the Constitution probably put the tax power first on the list of Congress's enumerated powers because they were acutely aware that one of the biggest problems of the old Articles of Confederation was that its version of Congress did not have the power to tax, and thus didn't have the power to do much of anything at all.