During his campaign, Donald Trump, the Republican candidate for president, made a promise to seniors that was very important to them: Social Security payments would not be taxed.
Since Trump won a second term, people who get Social Security may be wondering if that change will happen now. Trump has a majority of Republicans in both the Senate and the House of Representatives, but it might be hard to get rid of those taxes.
Any changes to Social Security would need at least 60 votes in the Senate, which means that Democrats would have to work with Republicans.
Experts warn, though, that cutting taxes on benefits without making other changes to make up for the lost money will make the program’s budget problems worse.
Social Security payments could change with the Trump administration
As a former public trustee for Social Security and Medicare and now a senior research strategist at the Mercatus Center at George Mason University, Charles Blahous said it is hard to imagine Democrats willing to give votes to get over that 60-vote threshold and threaten the solvency of Social Security.
A recent report from the Committee for a Responsible Federal Budget says that lowering taxes on Social Security payments, along with Trump’s other promises to raise tariffs, deport immigrants, and get rid of taxes on overtime and tips, would “dramatically worsen” the program’s finances.
Still, when the report came out, the Trump campaign told CNBC that those conclusions were not supported and that the Committee for a Responsible Federal Budget was “consistently wrong.”
The campaign did not respond to a request for comment on Wednesday about where the proposal stood on Trump’s list of priorities after the inauguration.
Actuaries for the program say that the Social Security trust fund, which helps pay retirement benefits, will run out of money by 2033.
At that point, all beneficiaries may see their benefits cut, but new research suggests that the president may be able to decide how those cuts are split up among beneficiaries.
Which Americans would benefit the most from this move?
Experts say that getting rid of taxes on Social Security benefits would mostly help the rich. An analysis released in August by the Urban-Brookings Tax Policy Center said that the change would help households earning between $63,000 and $200,000 the most.
Households with incomes of $32,000 or less would not see their taxes go down because most of their Social Security benefits are not taxed right now.
Meanwhile, people whose yearly income is between $32,000 and $60,000 may get about $90 in tax breaks, the report says. Blaus said that if you give tax breaks to older people with higher incomes, you might also make them less appealing to politicians.
Up to 85% of Social Security benefits may be taxed right now, depending on how much money a person or married couple makes. The combined income formula is used to figure out those taxes.
It takes into account the total of your adjusted gross income, interest that is not taxed, and half of your Social Security checks. People whose combined income is more than $34,000 may have to pay up to 85% in taxes on their benefits.
Married couples may have to pay this if their combined income is more than $44,000.
Also, people who get benefits alone may have to pay taxes on up to half of them if their combined income is between $25,000 and $34,000, or between $32,000 and $44,000 if they are married.
Because those standards have not been changed, more Social Security benefit income will eventually be taxed.
According to financial planners, taking away the benefits tax should not be included in financial plans just yet. One example is David Haas, who is a certified financial planner and the owner of Cereus Financial Advisors in Franklin Lakes, New Jersey.
He says that a law or policy’s future is uncertain if it is not properly written or adopted.
Beneficiaries can only wait for now to see how Trump handles this situation and for the administration, Congress, experts, and lawmakers to agree on a solution that works for everyone.
