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Former President Donald Trump’s new proposal to eliminate taxes on Social Security benefits would shrink the lifespan of that program and Medicare, according to analyses from several think tanks, countering his campaign pledge to shield the programs from cuts.
Both the nonpartisan Committee for a Responsible Federal Budget and the right-leaning Tax Foundation said Trump’s plan would move up the insolvency date by as much as six years for Medicare and nearly two years for Social Security. That’s because scrapping the tax on benefits would reduce federal revenue, which would then trim the amount that the government could spend on supporting those programs.
The government currently projects Social Security will run out of funds in 2035, and the same for Medicare in 2036. At that point, both programs face the prospect of cuts in benefit checks for retirees and payments to hospitals treating patients relying on Medicare coverage.
Trump on Friday brushed off the earlier insolvency date, arguing his plan could create the environment to come up with solutions to address the funding gaps. “One of the things good about that is that’s when people will make a deal,” Trump told Fox Business’s Maria Bartiromo. “But we’re going to take care of Social Security, we’re not going to do anything to hurt our seniors. There is so much cutting, there is so much waste in our government.”
In a statement to Semafor on how the proposal squares with his campaign vow, the Trump campaign pointed to Vice President Kamala Harris’ support in the 2020 Democratic primary for Medicare for All, which he argues would be a fiscal burden. She recently backpedaled from that position.
“President Trump is calling for the largest deportation program since President Eisenhower to end the financial drain on our healthcare system and ensure that our country can continue to care for American citizens who rely on Medicaid, Medicare, and Social Security – not illegal immigrants,” Trump spokesperson Karoline Leavitt told Semafor.
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Currently, individual seniors who have annual incomes between $25,000 and $34,000 must pay income tax on 50% of their Social Security benefit. Those earning above $34,000 are required to pay tax on 85%.
In addition, many undocumented immigrants buoy the finances of both Social Security and Medicare, since they pay into the programs without receiving benefits.
Trump’s campaign pitch is enormous in scale and an expensive one. Both the CRFB and Tax Foundation project it would cost at least $1.6 trillion over a decade.
Brendan Duke, the senior director of economic policy at the liberal leaning Center for American Progress Action Fund, told Semafor that it’s “a big fiscal idea comparable to TCJA 1.0,” referring to the 2017 GOP tax cuts.
If Trump’s plan is turned into law, a large share of the benefit will flow towards richer seniors. Marc Goldwein, a senior vice president at CRFB, told Semafor that less than half of total seniors would get a tax cut, with very few of the bottom half benefiting from the change. He added those drawing the “biggest dollar benefit” are those making over $750,000 a year, a cohort that typically draws from investments, pensions, and other sources of income.
Joseph’s view
This isn’t the first time that Trump proposed an idea that experts argued jeopardized Social Security and Medicare’s finances. He did the same in the summer of 2020 with a payroll tax cut meant to provide another batch of relief during the pre-vaccine era of the pandemic. The Biden campaign cut an attack ad assailing the proposal as a cut to Social Security, though fact-checkers at the time said it was “oversimplified.” It’s possible the Harris campaign replays the 2020 Biden playbook.
The View From A Trump Adviser
Stephen Moore, an economic advisor to Trump, told Semafor the former president’s proposal was “ingenious.”
“Getting older people to stay in the workforce longer is a high national priority,” Moore said. “I’m sure Trump will roll out more in the weeks ahead. Dems are mad they didn’t think of this.”