Social Security payments would be exempt from taxes under former President Donald Trump’s latest campaign trail tax cut proposal, as he seeks to secure key voters in an increasingly competitive race.
The cost of fully exempting Social Security benefits from taxes could top $1.6 trillion over a decade, according to the Tax Foundation, a right-leaning think tank. The policy has some supporters on both sides of the aisle in Congress, but so far legislative proposals have failed to pick up momentum.
“SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!” Trump wrote Wednesday on his social media website, Truth Social.
The proposal, which was absent from the 2024 GOP platform released earlier this month, arrives on the heels of Trump’s promise to exempt tip income from taxes as well. Trump first floated his tip tax idea in Nevada, home to a large number of service industry workers and a key swing state in November.
Seniors typically make up a large share of voters, and more of them vote than other age categories. In the 2020 elections, seniors accounted for more than a quarter of all voters, and three-quarters of them actually voted, compared with just over half of 18- to 24-year-olds, for example, according to census data compiled by KFF. And seniors are well-represented in swing states like Pennsylvania, Michigan, Wisconsin, Florida and Arizona.
Older voters, whotend to favor Republicans, are a constituency Trump probably needs to keep in his column. Recent polls show Trump’s race against the expected Democratic nominee, Vice President Kamala Harris, is tightening up.
Currently about 40 percent of seniors who receive Social Security have to pay taxes on the benefit, according to the Social Security Administration. Beneficiaries earning less than $25,000 don’t have to pay the tax; above that threshold, up to 50 percent of income is subject to the tax, and starting at $34,000, up to 85 percent is taxed.
The revenue generated by taxing benefits is used toshore up the Social Security and Medicare trust funds, which are currently dwindling. The Social Security trust fund, if combined with the program’s Disability Insurance Trust Fund, could pay out the full retirement benefit until 2035. At that point, benefits would face a 17 percent cut, according to the annual trustees report.
Bipartisan support, to a point
Members of Congress on both sides of the aisle have pushed to exempt Social Security payments from income tax, though no bipartisan proposal has emerged this Congress.
Republican Reps. Daniel Webster of Florida and Thomas Massie of Kentucky introduced a bill that would repeal the tax and refill the trust funds by appropriating from the Treasury’s general fund. The bill would bar tax increases to cover the losses. It has 32 co-sponsors, all Republicans.
Rep. Angie Craig, D-Minn., introduced a bill that would repeal the tax but offset the cost by subjecting earnings above $250,000 to Social Security payroll taxes, which currently don’t apply to wages and salaries above $168,600, though that figure rises each year with inflation.
The payroll tax increase in Craig’s bill also would restore full Social Security solvency through 2054, about two decades longer than under current law, according to the Social Security Administration.
Eleven Democrats co-sponsored Craig’s bill. Several face competitive races this fall, including Reps. Yadira Caraveo of Colorado and Don Davis of North Carolina, whose reelection chances are rated Toss-ups by Inside Elections with Nathan L. Gonzales.
Mixed reception
Trump’s proposal faced a mixed reception in the Senate on Wednesday, in contrast to the largely positive response to his promise to exempt tax from tips.
Senate Republicans were sympathetic to the proposal, but some pointed out the logistical difficulties of passing such legislation, as well as the more urgent need of extending Social Security solvency.
“All of these things make a lot of sense, but we also have to keep in mind that Social Security right now is headed towards insolvency,” said Sen. Thom Tillis, R-N.C. “All these things have to work in the context of how they pay for themselves. I, for one, think we can start by just getting the current program on sound fiscal footing, and then we can talk about all kinds of additional things that we can do for seniors.”
Fellow Senate Finance member Charles E. Grassley, R-Iowa, agreed the idea should be discussed in the context of a broader Social Security overhaul.
“That can only come up when we’re doing something about the long-term viability of Social Security,” he said. “It needs to be presented in that environment when you have Republicans and Democrats and whoever’s president at the same table.”
Sen. James Lankford, R-Okla., said the idea was just one “of a thousand things that need to be discussed” in relation to Social Security.
President Joe Biden has floated levying a Social Security payroll tax on individuals earning more than $400,000 and shoring up benefits for lower-income and longer-living retirees, but the White House left the proposal out of the president’s budget plans.
Republicans have issued contradictory proposals for overhauling the program. The GOP party platform promises to make no changes to Social Security benefits, including leaving the retirement age untouched. But the conservative House Republican Study Committee has proposed cutting benefits for upper-income beneficiaries and pushing back the retirement age from 67 under current law.
Lankford and Grassley noted that unlike other tax measures, legislation touching on Social Security cannot be passed through the budget reconciliation process. That likely makes it a nonstarter when it comes to each party’s plans for handling the 2017 tax provisions expiring at the end of next year.
Still, the idea found some enthusiastic backers among Republicans.
“Our seniors, who often live on fixed incomes and are living paycheck-to-paycheck, are perhaps suffering the most from Biden-Harris’ inflationary policies. So it’s just one way to consider to help give our senior citizens a break,” said Sen. Steve Daines, R-Mont., who leadsSenate Republicans’ campaign arm.
Democrats were less willing to take the eight-word policy proposal seriously.
“If I tried to spend my day chasing every balloon that he has placed in the air, I couldn’t ever do anything like actually get to help kids and families and people hit by disasters and the like,” Senate Finance ChairRon Wyden, D-Ore., said of Trump.
