In November, Republican candidate Donald Trump triumphed over his Democratic opponent Kamala Harris. Now that Trump is set to return to the White House for a second term, many retired workers depending on Social Security are hopeful that he will bring positive changes.
During his campaign, Trump promised to protect Social Security and vowed that seniors should not have to pay taxes on their Social Security income.
He also reassured voters that he would not cut benefits. While his intentions seem to be in the right place, Trump has not provided clear details about how he plans to fulfill these promises.
However, a recent report from the Committee for a Responsible Federal Budget (CRFB) suggests that Trump’s proposed changes could harm Social Security recipients.
According to the CRFB, his plans could worsen the program’s funding issues and speed up the timeline for benefit cuts.
Trump’s Proposal to End Social Security Taxation
Social Security benefits were not always taxed. Congress added this tax in 1983 to help keep the trust fund in balance. Since then, various politicians, including Trump, have suggested eliminating this tax.
The problem with such proposals is that Social Security is facing a major funding crisis again. The trustees of the program estimate that the trust fund, which pays out benefits to retired workers and other beneficiaries, will run out by 2035.
If this happens, payroll taxes will only cover about 83% of the scheduled benefits, which means a 17% cut could happen within a decade.
There are only two ways to fix this problem: either increase the money coming into the program (by raising taxes) or decrease the money going out (by cutting benefits).
Trump’s proposal to end taxes on Social Security benefits would not help in either case. It would reduce one of the funding sources, which could make the problem worse.
Trump’s Other Tax Proposals Could Hurt Social Security
Trump has also proposed eliminating taxes on tips and overtime pay. Since Social Security relies heavily on payroll taxes (over 90% of its funding comes from them), these changes could reduce the program’s revenue even further.
The CRFB estimates that these changes could lead to a nearly $2 trillion loss in federal revenue over the next decade. This would make the funding issue even more urgent.
Additionally, Trump has suggested imposing tariffs on imports, including a 10% tariff on all goods and a 60% tariff on items from China.
Many economists believe these tariffs could lead to higher inflation. Inflation would raise the size of cost-of-living adjustments (COLAs), which could force Social Security to spend more money.
While tariffs might boost federal revenue, they could also lead to higher inflation, which would hurt Social Security in the long run.
The Risk of Hasty Benefit Cuts
In short, Trump’s plan to eliminate the tax on Social Security benefits, along with his proposals to cut taxes on tips and overtime pay, could hurt the program’s funding.
These changes could collectively reduce Social Security’s revenue by an estimated $2.3 trillion by 2035. As a result, Social Security benefits could be cut three years sooner than previously expected, according to the CRFB.
Marc Goldwein, senior policy director at the CRFB, stated, “I don’t think I’ve ever seen a plan that would have this big of a negative effect on solvency in a general election campaign.”
Despite this, Trump’s press secretary Karoline Leavitt has responded to the CRFB report, assuring that Trump will “quickly rebuild the greatest economy in history” and strengthen Social Security for future generations. However, this reassurance still lacks specific details about how he plans to achieve these goals.
For now, Social Security recipients should continue to keep a close watch on developments. Given Congress’s history of delaying action on Social Security issues, it’s likely that significant changes will not happen anytime soon.
Note: Every piece of content is rigorously reviewed by our team of experienced writers and editors to ensure its accuracy. Our writers use credible sources and adhere to strict fact-checking protocols to verify all claims and data before publication. If an error is identified, we promptly correct it and strive for transparency in all updates, feel free to reach out to us via email. We appreciate your trust and support!
Leave a Reply