Analyzing President-elect Trump’s Proposed Elimination of Income Tax on Social Security - DailyMail.com; AMAC
The days, weeks, and months following Donald Trump’s return to the White House will be eventful, to be sure. And one of the key policy areas seniors will be following closely is candidate Trump’s promise to remove Social Security benefits from the federal income tax calculation, a move that would benefit millions of taxpayers. In a DailyMail.com post today, U.S. Assistant Consumer Editor Tilly Armstrong examines how such a tax law change would play out across various household income levels.
As Ms. Armstrong points out, Tax Policy Center statistics show that earners would realize the most significant financial benefit at the $5 million and up-level–the top 0.1%–although middle-income households (earnings in the $63,000 to $113,000 range) would stand to see an annual tax savings of about $630 and households with earnings in the $113,000 to $206,000 range saving about $1200.
The post goes on to explain that the tax change, as proposed, will likely face legislative challenges due to its projected impact on the Social Security insolvency problem. Ms. Armstrong notes that with the program’s trust fund reserves expected to be fully depleted by 2033, elimination of this portion of its income stream (roughly $50 billion in 2023) is projected to move this depletion forward by about three years, according to the nonpartisan Committee for a Responsible Federal Budget.
The Need for a Long Range Solution
Given the forecasted impact on Social Security’s rapidly deteriorating financial situation, it’s reasonable to expect that this proposal will more likely need to be considered in the context of overall program reform, with other program adjustments to compensate for the lost revenue. Many organizations have been working hard to develop long-term solutions to Social Security’s looming insolvency problem, and some have included changes to the benefit taxation issue similar to the Trump proposal. An example of one such solution can be found in the Association of Mature American Citizens (AMAC, Inc.) Social Security Guarantee. AMAC believes Social Security must be preserved and modernized. This can be achieved through slight modifications to cost-of-living adjustments and benefit calculations for high-income beneficiaries, coupled with gradual increases to the full (but not early) retirement age. AMAC supports an increase in the threshold where benefits are taxed and then indexed for inflation and calls for eliminating the reduction in benefits for those choosing to work before full retirement age. Summaries of the AMAC position–the AMAC Social Security Guarantee–can be viewed at AMAC.us.