Republican presidential candidate and former US President Donald Trump arrives to speak at his 2024 US presidential election rally, at the Palm Beach County Convention Center, in West Palm Beach, Florida, USA, on November 6, 2024.
Brendan McDermid | Reuters
During the election campaign, Republican presidential candidate Donald Trump made a notable promise to retirees: No Social Security taxes benefits.
Now that Trump won a second presidential term, which could lead Social Security beneficiaries to wonder if this change can come to fruition.
But remove these taxes That could prove a difficult task, even though Trump has a Republican majority in the Senate and House of Representatives. Any changes to Social Security would require at least 60 votes in the Senate, so Republicans would need some Democratic support to pass these changes.
Simply eliminating benefit taxes, without any other changes to compensate for this loss of revenue, would amount to worsen the program’s current funding problemssay the experts.
“It’s hard for me to imagine that Democrats would be willing to provide votes to exceed that 60-vote threshold and weaken the solvency of Social Security,” said Charles Blahous, senior research strategist at the Mercatus Center. George Mason University, who also served as public trustee of Social Security and Medicare.
“I think a lot of Republicans would have heartburn about this as well,” he said.
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Ending taxes on Social Security benefits — along with other Trump proposals to end taxes on tips and overtime, impose tariffs and deport immigrants — “worsen considerably“The finances of Social Security, noted the Commission for a Responsible Federal Budget in a recent report.
The Trump campaign pushed back on those findings, calling the Committee for a Responsible Federal Budget “systematically flawed” in a statement. statement to CNBC when the report was published.
The campaign did not respond to a request for comment Wednesday on where the proposal stands on Trump’s list of priorities after his inauguration.
The Social Security trust fund used to help pay retirement benefits is should run out in 2033, according to the program’s actuaries. At that time, recipients could experience across-the-board reductions in their benefits, although the president could have the ability to determine how those reductions will be distributed among recipients, depending on recent research.
High-income seniors would benefit the most
Experts say those who would benefit most from eliminating taxes on Social Security benefits would be the wealthy.
Households with incomes between $63,000 and $200,000 would benefit the most from this change, according to a report. August analysis from the Urban-Brookings Tax Policy Center.
Low-income households earning $32,000 or less would not receive a tax cut because most of their Social Security benefits are currently not taxed. Meanwhile, those with annual incomes between $32,000 and $60,000 could see a tax cut of about $90, the study found.
“You’re giving a tax break to higher-income seniors, which could also dampen his political selling ability,” Blahous said.
Currently, up to 85% of Social Security benefits can be imposed based on the income of an individual or a married couple. These taxes are determined based on a formula called combined income, or the sum of adjusted gross income, tax-free interest, and half of Social Security benefits.
Individuals must pay up to 85% tax on their benefits if they have more than $34,000 in combined income; for married couples, which applies if their combined income is more than $44,000.
Individual beneficiaries can pay taxes on up to 50% of their benefits on a combined income between $25,000 and $34,000, or for married couples between $32,000 and $44,000.
Because these thresholds are not adjusted, more Social Security benefit income gradually becomes subject to income tax.
For now, financial advisers say it’s too early to factor the elimination of benefit taxes into financial plans.
“You don’t know what the law or policy will be like if it hasn’t yet been properly written, let alone passed,” said David Haas, certified financial planner and owner of Cereus Financial Advisors in Franklin Lakes, New York. . Jersey.
“I wouldn’t jump to any conclusions,” he said.
