Trump Wants To Eliminate Social Security Tax for Seniors: What That Would Mean for Your Wallet and the Economy
Written by
Jacob Wade
Edited by
Gary Dudak
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On July 31, 2024, Donald Trump posted on Truth Social that “SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!”
While this might sound like a good way to save seniors money (especially those relying heavily on Social Security income), is this actually a good idea? And how would this tax policy change affect tax revenue and the broader economy?
We asked a few financial experts to weigh in on the topic to find out if this change would be possible, how much it would actually save seniors, and how it would affect the rest of the U.S.
Trump’s Social Security Tax Plan
Former President Trump is focused on Social Security in his campaign, with his recent Truth Social message stating that he plans on ending taxes on Social Security income for seniors. The details of how he plans on eliminating this tax are currently unclear.
Trump reiterated his position in a recent interview with “Fox & Friends.” While fielding an audience question about how he’ll handle Social Security, Trump stated, “People on Social Security are being killed. And one of the things I’m doing is no tax for seniors on Social Security.”
This means that anyone who is currently drawing Social Security income would not have to pay tax on that Social Security income.
How Eliminating Social Security Taxes Could Affect Seniors
By repealing income tax collected on Social Security income, seniors could save nearly $1.8 trillion over the next nine years, according to the Committee for a Responsible Federal Budget (CRFB). While it can help seniors keep more of their cash in retirement, it may not be favorable to those who need it most.
Social Security income is not fully taxable until a certain level of income. So this means that many seniors aren’t paying taxes on that Social Security income today, and this proposed tax break would have no impact.
In fact, only 40% of seniors who are receiving Social Security benefits have to pay taxes on them. Social Security taxes are broken down into income brackets:
- If your taxable income is less than $25,000 ($32,000 for married filing jointly), your Social Security income is not taxable.
- If your taxable income is between $25,000 and $34,000 ($32,000 and $44,000 for married filing jointly), you pay income tax on up to 50% of your benefits.
- If your taxable income is between over $34,000 ($44,000 for married filing jointly), you pay income tax on up to 85% of your benefits.
So while cutting income taxes on Social Security can save retirees some money, it may not have the large impact that some pay expect.
How Eliminating Taxes Could Affect the Social Security Program
While eliminating taxes on Social Security sounds like a good deal for retirees, it could have detrimental effects on the Social Security program itself. According to research from the CRFB, eliminating Social Security income tax could result in a $1.6 trillion to $1.8 trillion deficit in the next 10 years. Yes, that’s trillion with a T.
Since Social Security income taxes fund the Social Security and Medicare Hospital Insurance (HI) trust funds, removing those taxes could deplete the funds quicker. As of 2024, the Social Security Administration has stated the trust fund will become insolvent by 2035. This shortfall could come sooner if Social Security taxes are no longer in play.
In fact, there is a 21% benefit cut projected by the year 2035 based on current trajectories for the Social Security program, but eliminating the income tax could widen that to 25%. This could have a detrimental effect on future retirees.
Is Trump’s Social Security Tax Plan a Good Idea?
While the idea of reducing the tax burden on seniors may feel right, it might cause more harm than good down the road, especially for those most vulnerable. But in the meantime, it can help seniors right now who may be struggling due to an excessive tax burden in retirement.
“With the additional funds, many seniors could afford critical living expenses like healthcare and housing that fixed incomes often struggle to cover,” said John F. Pace, a CPA with 40 years of experience. “There are good arguments on both sides, but we must consider the human impact. Our society should aim to support seniors and the vulnerable after decades of hard work and public service. If eliminating these taxes can achieve that goal without compromising essential programs, it deserves consideration.”
Supporting seniors is always a good idea, but policy changes at this level should always consider the tradeoff. In this case, that tradeoff could be sacrificing the income for future retirees.
“Personally, I worry this could impact my parents and many clients who rely on Social Security in retirement,” said Marty Burbank, an elder law attorney. “Medicare is essential for their medical care. While tax cuts provide short-term gains, we must consider long-term effects, especially on vulnerable groups.”
This proposal may have some benefit, but the details matter. It may be best to include a way to secure additional revenue for the Social Security program in tandem with eliminating taxes so that Social Security benefits can still be available in full to future retirees as well as current retirees.
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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