By Caitlin Reilly
CQ-Roll Call
(TNS)
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 [July 31] 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, who tend to favor Republicans, are a constituency Trump likely 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% 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% of income is subject to the tax, and starting at $34,000, up to 85% is taxed.
The revenue generated by taxing benefits is used to shore 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% cut, according to the annual trustees report.
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.
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©2024 CQ-Roll Call Inc., All Rights Reserved. Visit cqrollcall.com. Distributed by Tribune Content Agency LLC.
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Tags: Benefits, Human Resources, Payroll, Taxes
