President-elect Donald Trump’s campaign promise to eliminate Social Security benefit taxes has raised concerns among experts who believe it could harm the program’s long-term sustainability. Social Security benefit taxes, which have been in effect since 1984, impact retirees whose incomes exceed certain thresholds. Eliminating these taxes would remove one of Social Security’s three funding sources, along with payroll taxes and trust fund interest.
While temporarily compensating for the loss by drawing more from trust funds might be an option, it is not a sustainable solution. Even with current benefit taxes, projections indicate that Social Security will only be able to pay out full benefits until approximately 2035, after which a 23% benefit cut is anticipated unless additional funding measures are implemented. Removing benefit taxes would expedite this scenario, potentially leading to significant benefit reductions for future retirees.
Social Security funding concerns raised
Trump’s pledge to eliminate these taxes is not something he can achieve unilaterally as president. Congressional approval is required to change tax laws, and even with Republican control of both the House and Senate, passing such legislation would be a complex and uncertain process.
The Committee for a Responsible Federal Budget (CRFB), a nonpartisan and nonprofit organization, argues that the changes proposed by Trump could widen the program’s funding deficit and hasten the timeline to benefit cuts. Trump also proposed eliminating taxes on tips and overtime pay, which could collectively reduce federal revenue by nearly $2 trillion over the next decade, according to the CRFB. Marc Goldwein, senior policy director at CRFB, said, “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.”
However, Karoline Leavitt, national press secretary for Donald Trump, responded to the CRFB report, stating, “President Trump will quickly rebuild the greatest economy in history and put Social Security on a stronger footing for generations to come, all the while eliminating taxes on Social Security for America’s well-deserving seniors.”
While eliminating Social Security benefit taxes might seem advantageous for retirees at first glance, the long-term financial implications for the Social Security program and future benefit stability suggest otherwise.
This proposal must be carefully considered within the broader context of ensuring the program’s sustainability for current and future generations.
