Republican presidential candidate Donald Trump has promised to cut taxes on Social Security, taking direct aim at the 67 million Americans who rely on the monthly benefits. “Senior citizens should not pay taxes on Social Security, and they won’t,” Trump announced at a campaign rally last week.
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Before the rally, he shared his message with his followers on Truth Social, posting the following in all caps: “Seniors shouldn’t have to pay taxes on Social Security!”
His pledge comes at a time of rising poverty among seniors. According to the National Council on Aging, more than 17 million seniors, or about one in three people over 65, were “economically insecure” as of February 2024. NCOA also highlights that millions of older workers are nearing retirement with no savings.
About 40 percent of Social Security recipients pay federal income taxes on their benefits. If an individual’s combined income is between $25,000 and $34,000, they pay income taxes on up to half of their benefits. Once their combined income exceeds $34,000, up to 85 percent of their benefits may be taxable, depending on their total income.
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While the plan seems helpful, experts warn that cutting the income tax on Social Security could backfire and harm the program by removing one of its key sources of funding. According to the Tax Foundation, exempting these benefits from income taxes would increase the budget deficit by about $1.6 trillion over 10 years and accelerate the bankruptcy of the Social Security and Medicare trust funds.
Experts worry that Trump’s plan could have serious financial implications. They warn that the loss of revenue from taxing Social Security benefits could destabilize these vital programs, potentially leading to cuts to benefits or higher taxes elsewhere. Trump has not yet said how he will replace the lost funding for Social Security.
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According to an Aug. 2 Tax Foundation article, the move would be “unsound and fiscally irresponsible.” In 2024 alone, the trust funds are expected to collect about $95.3 billion in income tax revenue on Social Security benefits, a figure that is expected to rise to more than $228 billion by 2033. Eliminating these taxes would likely accelerate the insolvency date of Social Security by two years, to 2033, and Medicare by six years, to 2030.
While Trump’s proposal could increase net income for Social Security recipients and modestly boost GDP and employment, the overall economic benefits would be minimal compared to the significant revenue loss. Higher incomes would benefit more from this tax break, while the bottom 20% of income earners, who are already in the 0% tax bracket for benefits, would see no change.
Critics argue that completely exempting Social Security benefits from income taxes is neither fiscally responsible nor sound tax policy. Instead, they propose indexing the combined income tax thresholds for inflation, which has not been done since 1993. This reform could alleviate some of the tax burden on Social Security benefits without significantly damaging the program’s funding.
As the debate continues, the focus remains on finding a balance between supporting seniors and endangering the financial stability of Social Security and Medicare.
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This article Trump Says ‘Seniors Shouldn’t Have to Pay’ – Experts Criticize His Plan to Eliminate Social Security Taxes as ‘Unsound and Irresponsible’ originally appeared on Benzinga.com
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