Millions of Americans will wait to see whether Donald Trump will make good on his campaign promise to cut taxes on Social Security benefits.
Upper income earners would benefit most from the proposed changes, experts say, and the cuts would come at a cost to the Social Security program’s struggling finances.
Up to 85 percent of Social Security benefits can be taxed based on an individual or couple’s income — and about 40 percent of retirees currently pay federal taxes on their benefits.
Americans earning less than $32,000 would not get a tax cut under Trump’s proposals because most of their Social Security benefits would not be taxed anyway.
Households earning between $32,000 and $60,000 would receive an average discount of about $90, according to the figures. analysis from the nonpartisan Urban-Brookings Tax Policy Center.
Middle-income Americans earning between $63,000 and $113,000 would save an average of $630, while those earning between $113,000 and $206,000 would typically save about $1,200 on their tax bill.
Millions of Americans will wait to see whether Donald Trump will make good on his campaign promise to cut taxes on Social Security benefits
In dollar terms, the biggest winners from the change would be those in the top 0.1 percent of income earners, who earn nearly $5 million or more, according to the Tax Policy Center.
By 2025, they would receive an average tax cut of nearly $2,500 per month.
Social Security benefits often represent a substantial share of the incomes of middle-income households, the report said.
Withdrawing taxes on these benefits therefore reduces average after-tax income by a larger percentage than for very high-income households, which receive a relatively small share of their total income from Social Security.
About 28 percent of middle-income households would get a tax cut, and among the top 0.1 percent of earners, about 20 percent of households would get a tax cut.
But economists have warned that the proposal would weaken the solvency of the Social Security program, exacerbating existing funding problems.
It could also be difficult to get through Congress, even though Trump has Republican majorities in both the Senate and House of Representatives.
Simply eliminating the tax on Social Security benefits, without making any other changes to the program to offset that loss of revenue, would dent its already dwindling finances.
Up to 85 percent of Social Security benefits can be taxed based on an individual or couple’s income
Americans earning less than $32,000 would not get a tax cut under Trump’s proposals because most of their Social Security benefits would not be taxed anyway
According to the nonpartisan Committee for a Responsible Federal Budget, Trump’s plans would bankrupt Social Security within six years.
That is three years earlier than existing forecasts.
At that point, beneficiaries would see across-the-board cuts to the benefits that millions of Americans rely on.
“We believe President Trump’s campaign proposals would dramatically worsen Social Security’s finances,” the CRFB budget group said in a statement blog post last month.
Any changes to the program would require at least 60 votes in the Senate.
“It’s hard for me to imagine that Democrats would be willing to give votes to cross that 60-vote threshold and weaken Social Security’s solvency,” said Charles Blahous, senior research strategist at George Mason University’s Mercatus Center, who also served as chairman. a public trustee for Social Security and Medicare, told CNBC.
“I think it would give a lot of Republicans heartburn too,” he said.