The presidential campaign is officially over, and with President-Elect Donald Trump’s victory, it’s time to look at some of the proposals that propelled him to victory this time.
One of the most popular proposals he made was the elimination of Social Security taxes, which appeared to resonate with the public, according to a new Monmouth University poll.
This isn’t the only tax change he proposed; he also wanted to eliminate income taxes on tips and overtime pay, but they all affect the same organization: the Social Security Administration (SSA).
A Monmouth University poll conducted from December 5 to 10, polling 1,006 adults aged 18 and up, found that 66% of Americans support plans to eliminate income taxes on Social Security benefits, tips, and overtime, while 21% oppose the idea.
Similarly, an ABC News/Ipsos poll from October found that 85% of respondents supported this proposal, making it the most popular economic policy of the 2024 presidential campaign, with 55% expressing strong approval.
Patrick Murray, director of the independent Monmouth University Polling Institute, stated, “Republicans are even more enthusiastic about a second Trump term than they were the first time around.” They are particularly looking forward to him carrying out the plans he promised.”
However, this may not be the great idea that many believe it is, as it will have some unintended consequences that will impede the way Social Security operates in the short and long term.
Taxes on Social Security benefits
Contrary to popular belief, Social Security benefits are not subject to federal taxes, and few states tax them, so this policy will not affect those who rely solely on them and have no other sources of income (a large portion of the American population receiving benefits).
Taxes are based on “combined income,” which is calculated by adding your adjusted gross income, nontaxable interest, and half of your Social Security benefits. Even then, there are some thresholds that determine how much (if any) of your combined income is taxed.
You will pay tax on your Social Security benefits based on Internal Revenue Service (IRS) rules if you:
- File a federal tax return as an “individual” and your combined income is
- Between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits.
- More than $34,000, up to 85% of your benefits may be taxable.
- File a joint fedral tax return, and you and your spouse have a combined income that is
- Between $32,000 and $44,000, you may have to pay income tax on up to 50% of your benefits.
- More than $44,000, up to 85% of your benefits may be taxable.
- Are married and file a separate tax return, you probably will pay taxes on your benefits.
When these provisions were implemented, only about 10% of beneficiaries were supposed to be taxed on their combined income; however, nearly 50 years later, the thresholds have not been updated for inflation, bringing the number of beneficiaries who must pay taxes closer to 40% of all beneficiaries.
If these policies were implemented, the consequences would be disastrous for both beneficiaries and the SSA as a whole. The Tax Foundation estimates that the policies would reduce tax revenue by $1.4 trillion between 2025 and 2034, as well as “likely accelerate” the insolvency of the Social Security trust funds, which are expected to deplete in 2034.
Indeed, it would ensure that all income groups see “a slight increase in after-tax incomes, averaging about 0.9 percent.”
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