Donald Trump promised to lower Social Security taxes during his campaign, but recipients might not realise the full cost of this change. Trump defeated Democratic opponent Kamala Harris in a close race to become the 47th president of the United States during this week’s elections. During a rally in July, he declared that he would not raise the retirement age “by one day” and would enhance the program in his list of platform concerns. He reaffirmed his commitment in September to lower taxes on gratuities, overtime, and Social Security benefits. That concept is quite popular, said Nancy Altman, director of the lobbying group Social Security Works. The problem is that he hasn’t paid for it.
Although experts cautioned that lowering taxes on Social Security benefits would decrease the amount of money that goes into the trust funds that fund the program, many recipients would gain in the short term. Social Security is already having financial problems. The trust funds are expected to be depleted within ten years. Trump’s proposal to lower taxes on Social Security payouts could hasten insolvency by three years, according to the nonprofit public policy group Committee for a Responsible Federal Budget. The CRFB estimates that beneficiaries may see a 33% cut in benefits, which is more than the current 23% projection from the Congressional Budget Office.
Two tiers determine a beneficiary’s eligibility for and amount of Social Security income taxes. In 2024, individuals earning between $25,000 and $34,000 without a spouse would have to pay taxes on up to 50% of their Social Security income. If their income surpasses that limit, they can be required to pay taxes on up to 85% of their benefits. The SSA states that if a taxpayer files a joint return and their income is between $32,000 and $44,000, they may be liable to pay taxes on up to 50% of their benefits, or up to 85% if their income is over that amount. These figures are based on “combined income,” which is the sum of a person’s adjusted gross income, nontaxable interest, and half of their Social Security benefits.
According to Andrew Biggs, a senior scholar at the American Enterprise Institute, payroll taxes—which employers and employees jointly pay 12.4% of up to $168,600 in income—and Social Security benefits taxes are the sources of funding for Social Security. It is projected that benefit tax revenue will keep rising in the 2024 trustees’ report. The income criteria have not changed, but as time goes on, people’s salaries and benefit amounts increase, thus more money will be collected through this revenue stream.
According to experts, Congress would probably face pressure to cut Social Security payments since Trump’s plan would put more burden on the program’s already limited budget. Because he understands the politics of how divisive cutting it is, Altman said, “I think his focus is on starving the beast and eroding its financing.” In essence, Trump’s position would harm the program. Legislators would be compelled to take action, or at the very least consider their options, in the event of a more severe insolvency crisis. Nevertheless, Congress has not yet found a solution to the current problem, despite years of trying.
“Reducing Social Security benefits is one way to address the insolvency issue, which the Republican Party has already suggested doing in a variety of ways, such as raising the retirement age or reducing the cost-of-living adjustment,” said Maria Freese, senior legislative representative at the National Committee to Preserve Social Security and Medicare. Furthermore, in their fiscal 2024 budget, the Republican Study Committee, a group of conservative Republican members of the U.S. House of Representatives, said that funds for bolstering Social Security could not be derived from general revenues because doing so would increase the nation’s debt.
The group also claimed that raising taxes to fund the program would hurt the economy and cause job losses. Thus, reducing taxes on Social Security benefits may be beneficial in the short term but “dangerous” in the long term, according to Freese. “It seems like it might help some people in the end, but recipients will suffer in the end,” Freese said. You’re talking about the middle class’s centre. Republicans who want to cut the program would go after the same people who benefited from tax cuts.
