Total change in Social Security if this happens on November 5th – Already confirmed

Recent attention has turned to Donald Trump’s economic proposal to eliminate federal income taxes on Social Security benefits, which has become one of the most popular ideas among the 2024 presidential candidates. According to an ABC News/Ipsos poll conducted in early October among 2,631 adults, 55% of respondents strongly support Trump’s plan, and 85% overall approve of the initiative, making it the most popular economic proposal in this election cycle.

In contrast, Democratic Vice Presidential nominee Kamala Harris has focused her economic proposals on different areas, such as controlling food prices and expanding child tax credits. While not directly related to Social Security, these policies have still garnered notable public approval: 66% of respondents support her plan to restrict profit margins in the grocery industry, and 71% favor her promise to increase child tax credits for middle- and low-income families.

Trump’s Social Security Tax Elimination Proposal

Trump’s proposed plan to eliminate taxes on Social Security benefits would target a specific group of seniors currently subject to income taxes on their benefits. Today, around 40% of Social Security beneficiaries pay federal income tax on their benefits, based on specific income thresholds. For individual filers with incomes between $25,000 and $34,000, 50% of benefits are taxable. Those with incomes over $34,000 may see up to 85% of their benefits taxed. Married couples filing jointly also face similar tax liabilities at different income thresholds, with 50% of benefits taxable for joint incomes between $32,000 and $44,000, and up to 85% taxable above that.

The rationale behind Trump’s plan is to provide financial relief to seniors by allowing them to keep more of their Social Security payments. In July, Trump confirmed his commitment to this policy, stating that he wants to eliminate these taxes “right now” as a means of providing immediate assistance to seniors.

Implications for Social Security Funding

While the proposal is popular, it has drawn criticism from tax experts and economists who caution that it could accelerate the depletion of Social Security’s funding. Social Security benefits are partially funded by income taxes on those payments; about 50% of these taxed benefits support the Social Security Old-Age, Survivors, and Disability Insurance (OASDI) trust fund, while the other half aids the Medicare Hospital Insurance (HI) trust fund. Cutting this tax would remove a significant source of revenue for these programs.

According to the Social Security Administration (SSA), the trust funds supporting Social Security are already projected to face a shortfall by 2033. Without intervention, funds may be depleted by 2034, which would lead to an approximate 20% cut in benefit payments to retirees. The Tax Foundation estimates that Trump’s proposal would reduce federal revenue by $1.4 trillion over a ten-year period from 2025 to 2034 if no compensating funds are established.

Potential Consequences of the Proposed Policy Change

Eliminating Social Security income taxes could have significant consequences on the future stability of Social Security benefits:

• Revenue Loss: The SSA would lose billions in annual revenue that directly support benefit payments, potentially advancing the timeline for fund insolvency.
• Impact on Beneficiaries: While tax elimination would provide temporary financial relief for recipients, it might lead to reduced benefits in the future as Social Security’s reserves are depleted faster.
• Need for Legislative Action: Congress would need to address the loss in funding by either creating new revenue sources or restructuring benefits to ensure long-term solvency.

The Broader Economic Debate

Trump’s tax proposal reflects broader discussions about Social Security’s future as the system faces demographic and financial pressures. Some policymakers argue for reforms, such as increasing income thresholds or adjusting benefit formulas, to sustain funding without cutting benefits. However, Trump’s proposal does not currently include a strategy to offset lost tax revenue.

Kamala Harris’s policies also touch on financial relief but aim at broader issues like food prices and child tax credits, attracting considerable support for their potential impact on daily living costs for families. While her policies are not directly tied to Social Security, they represent an alternative approach to economic relief aimed at middle- and low-income households.

Future Outlook for Social Security in the U.S.

Without changes to the current tax structure or new funding solutions, the SSA projects that the Social Security trust fund reserves could be exhausted by 2033. Lawmakers may need to make difficult choices to ensure Social Security remains solvent, including potential adjustments to benefit levels, tax thresholds, or other funding mechanisms.

For now, Trump’s proposal to eliminate Social Security income taxes has sparked renewed public interest and debate about the future of the program. Still, the absence of a replacement revenue source raises concerns about how to balance immediate relief for retirees with the program’s long-term financial health.