With former President Donald Trump again taking office this January, Americans are waiting to see how his economic policies will impact the nation, including more than 72 million people already receiving Social Security benefits.
Trump said that he doesn’t plan to cut even “one penny” from Social Security – a retirement program for seniors that Americans pay into throughout their lives via taxes – and Medicare, during a rally this July cited by Newsweek. He also said that he does not plan to raise the age at which Americans can begin claiming their benefits.
However, economic policies Trump has proposed increase the risk of impending Social Security insolvency, according to a report issued last month by the Committee for a Responsible Federal Budget. For example, the analysis found that his proposal to end taxation on Social Security benefits would cut off a revenue stream that actually finances Social Security.
Social Security benefits going to households that make under $32,000 are already not taxed, CNBC noted. Trump’s tax cut would benefit households making between $63,000 and $200,000, according to August analysis from the Urban-Brookings Tax Policy Center. Households bringing in between $32,000 and $60,000 in annual income could see about $90 in tax cuts, if it is implemented.
However, the plan is just at the idea stage right now.
“You don’t know what the law or policy is going to be if it hasn’t even been properly drafted yet, much less adopted,” said David Haas, a certified financial planner and owner of Cereus Financial Advisors in Franklin Lakes, New Jersey, quoted by CNBC.
According to the outlet, there are also legislative challenges awaiting any potential Social Security tax cut. Any changes to the Social Security program require 60 Senate votes, meaning that Republicans would need to convince some Democrats to agree to the proposition even with control of both chambers of Congress.
“It’s hard for me to imagine that Democrats would be willing to provide votes to get over that 60-vote threshold and weaken Social Security solvency,” said Charles Blahous, senior research strategist at the Mercatus Center at George Mason University, who has served as a public trustee for Social Security and Medicare, per CNBC. He said even Republicans might flinch at the proposal.
“The Trump campaign floated the idea of eliminating taxes on Social Security benefits months ago, but it’s hard to see such a proposal seeing the light of day,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.
Per the Committee for a Responsible Federal Budget, that isn’t the only Trump proposal that puts Social Security at risk. His proposal to end taxes on overtime pay and tips could also reduce payroll tax collection and thus decrease Social Security funding. Deporting unauthorized immigrants could reduce the number of people paying into Social Security, since they also pay into its coffers. Additionally, it said that plans to impose large tariffs on imports, could increase cost-of-living adjustments (COLAs) through higher inflation or reduce taxable payroll.
“We find President Trump’s campaign proposals would dramatically worsen Social Security’s finances,” said the nonpartisan agency.
It further explained that Social Security trust funds are expected to be insolvent by Fiscal Year (FY) 2034. At that point, the law calls for a 23% cut to benefits. If Trump’s proposed polices do become reality, the Committee for a Responsible Federal Budget estimates they would speed up the journey, moving the projected date from 2034 to 2031 and leading to a 33% across-the-board benefit cut in 2035.
These concerns come at a time when an aging population, rising healthcare costs and stagnant wage growth in the U.S. have contributed to skyrocketing dependence on government programs funded by taxpayer contributions, Audacy reported earlier this year.
While the Committee for a Responsible Federal Budget said Trump’s plans would increase Social Security’s ten-year cash shortfall by $2.3 trillion through 2025, Trump said that his plans to increase oil and natural gas drilling and growing the economy would close the shortfall. The Committee for a Responsible Federal Budget does not expect those plans to have a meaningful impact on Social Security funding.
“Faster growth can reduce Social Security’s shortfall,” it added. “But based on available analyses and understanding the effects of President Trump’s agenda on the national debt, it is unlikely his plans would significantly boost the size of the economy, and many estimates find his plans would reduce long-term output.”
CNBC said that the Trump campaign has pushed back on the findings and has called the Committee for a Responsible Federal Budget “consistently wrong.”
Newsweek also noted that Social Security staffing might be another issue under the future Trump administration. Republican lawmakers have advocated for staff cuts, which could result in issues or delays for people receiving benefits.
“Massive, sudden changes to Social Security are unlikely because of the program's popularity and importance to so many voters,” Michael Ryan – a finance expert and the founder of michaelryanmoney.com – said, according to Newsweek. “But incremental changes? Those are certainly possible.”