Social Security
Attention Social Security beneficiaries: these are the consequences of the measures Donald Trump wants to implement
Donald Trump promised to get rid of taxes on Social Security benefits among other proposals when he returns to office but more harm than good may be done.
President-elect Donald Trump will return to office on January 20, 2025 and he has promised to start implementing his campaign policy proposals on Day One. Among those was a promise to eliminate taxes on Social Security for retirees.
That would mainly benefit higher income beneficiaries as currently, only around 40% of people on Social Security pay federal taxes on their benefits because they have income above the established thresholds. Note that this percentage is expected to grow over time as the thresholds remain the same but benefit amounts grow with the annual cost-of-living adjustment (COLA).
However, the move, along with other proposals, will have an unintended consequence that will affect all beneficiaries.
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Attention Social Security beneficiaries: these are the consequences of the measures Donald Trump wants to implement
The US government began taxing Social Security benefits in 1984 to solve a funding shortfall for the program that was rapidly pushing the program’s trust fund to insolvency. Currently, without reforms to shore up the program, the Social Security Trust Fund will be drained by 2034 according to projections by the Congressional Budget Office (CBO).
The CBO estimates that that could mean a cut of 23% in 2035 across the board to benefits under the current law. The Committee for a Responsible Federal Budget has estimated that a typical couple that retires just before insolvency would see a cut in their benefits of $16,500.
However, under Trump’s proposals including an end to taxes on tips and overtime, the imposition of tariffs, and expanding deportations would dramatically worsen the financial state of Social Security. The CRFB’s analysis of Trump’s policies found that they would:
- Grow the ten-year cash shortfall for Social Security by $2.3 trillion through 2035
- Increase the annual shortfall by around 50% in 2035
- Advance the program’s insolvency by three years to 2031
- Result in a 33% benefit cut across the board in 2035 (with a range of 29% to 39% depending on the scenario)
- In order to not cut benefits, revenue through Social Security taxes would need to be increased by 50% to retore 75-year solvency
Social Security beneficiaries would also be affected by increased inflation from Trump’s planned tariffs and mass deportation. While Social Security benefits are adjusted annually so they keep pace with the cost of living, the Senior Citizen League has push for how the COLA is calculated to be changed.
The non-partisan organization says that seniors are losing purchasing power despite the increases. “The average payment for retired workers in 2024 is worth only about 80 cents on the dollar compared to 2010,” the League noted in a recent report.
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