Former President Donald Trump suggested this week that he wants to repeal the income tax on Social Security benefits. “SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!” he posted on his social media site, Truth Social.
While the all-caps proposal may have political appeal, fiscal experts have been nearly unanimous in their criticism of the idea.
Howard Gleckman of the Urban-Brookings Tax Policy Center said Friday that the proposed tax cuts would be enormously expensive and provide little to help low-income beneficiaries – all while making the country’s essential old-age programs less resilient.
“Former president Donald Trump’s plan to repeal the tax on Social Security benefits would lower taxes for US households by an average of $550, according to a new analysis by the Tax Policy Center,” Gleckman wrote. “But that tax cut would come with a big price: By reducing Social Security and Medicare hospital insurance (HI) revenues by $1.5 trillion over the next decade, Trump would drive both programs into insolvency faster, resulting in sharply reduced benefits for tens of millions of recipients.”
According to the TPC analysis, Social Security recipients earning less than $32,000 a year would see no gains, since most of their incomes are already untaxed. Those earning between $63,000 and $200,000 would see the biggest boost as a percentage of their after-tax income. The biggest tax cut would go to those in the top 0.1% of the income spectrum, who earn $5 million and higher; they would save $2,500 per year.
At the same time, the proposed tax cut would reduce the flow of revenues into the Social Security trust funds, accelerating their insolvency and moving up the date on which benefit cuts would potentially occur. According to calculations by the Committee for a Responsible Federal Budget, the tax cut would reduce the lifespan of the Social Security trust funds by more than one year, while the Medicare trust funds would reach insolvency six years earlier.
Nancy Altman, president of Social Security Works, which advocates for the program, said the proposal might be popular with older voters, even though it could hurt them in the long run. “It really is, in some ways, Trump advocating defunding Social Security,” she told CBS MoneyWatch. “It's a sleight of hand — it's giving with one hand and taking with another.”
