Donald Trump is promoting an entirely new tax plan to alleviate the taxes that U.S. retirees have to manage. This plan moves away from tips and Social Security income, instead, the U.S. Senate and House of Representatives have put forward a new proposal that relies on a temporary deduction for the very elderly.
Institutions such as the Congressional Budget Office and the Penn Wharton Budget Model expose that this fact is going to have an impact, to compensate for any inconvenience, the Trump administration presents a new rate on adunctions, despite the fact that the Council of Economic Advisors also explains that it will also negatively affect the lives of Americans.
This plan will mitigate taxes on Social Security
President Trump is currently telling voters that his 2024 tax plan will mitigate taxes on Social Security. But in the meantime, it does present several relief for seniors, it falls well short of fully getting rid of those taxes
Trump has been saying the line that his bill means “no tax on tips, no tax on Social Security, no tax on overtime,” even saying it on Fox News’ Sunday Morning Futures, but the actual legislation doesn’t quite back that up.
Get to know what is actually in the bill
Serveral versions of the bill has been passed by The House and Senate, and each takes into account a temporary tax deduction for seniors ages 65 and older. Even though this deduction isn’t specific to Social Security income, it applies to general income and only for a limited time.
The Senate plan includes a $6,000 deduction for seniors, on the other hand the House version offers $4,000. Both would kick in starting in 2025 and run through 2029. However, it must be underlined that not everyone qualifies. Seniors with higher incomes would see the deduction shrink or even disappear, and those with very low incomes, who already don’t pay taxes on their benefits, wouldn’t see any modification. The same happens for people who began collecting Social Security before age 65.
Which people would actually benefit
According to the Senate version, seniors earning up to $75,000 (or $150,000 for those couples who are married, filing jointly) would be up for the full deduction. As income rises above those limits, the benefit tapers off.
The White House is pitching this as a huge win for seniors, underlining numbers from the Council of Economic Advisers that say 88% of Social Security recipients won’t pay taxes on their benefits. But that takes into account people who already don’t pay any taxes to start with. Overall, they estimate around 33.9 million seniors, including some not even collecting Social Security yet, would benefit from the deduction, with an average boost of about $670 in after-tax income.
Experts call out misleading messaging
Several tax experts explain the messaging close to the bill is misleading. Garrett Watson from the Tax Foundation highlited that telling people Social Security taxes are being eliminated could be the reason of confusion, or frustration, at the time when seniors are conscious of the break isn’t as big as they were led to believe.
“While the deduction does provide some relief for seniors, it’s far from completely repealing the tax on their benefits,” Watson explained.
The price of a full repeal
Getting rid of taxes on Social Security altogether would imply a big cost. Analysts at the Penn Wharton Budget Model explain it would cut federal revenue by $1.5 trillion over the inciming decade and drive up the national debt by 7% by 2054. In addition, It could cause the Social Security Trust Fund to run out two years previously, by 2032 instead of 2034. And that’s just part of it. The Congressional Budget Office (CBO) explains that the Senate’s overall tax plan would add about $3.3 trillion to the deficit among 2025 and 2034.
Tariffs to the rescue?
To eliminate the extensive costs, Trump’s administration is trusting on increased revenue from tariffs. The CBO recently estipulated that Trump’s proposed tariffs could reduce the deficit by $2.8 trillion over the next decade.
However, there’s a trade-off. The CBO explains that those tariffs might slow down the economy, drive up prices, and squeeze household budgets, in special for low- and middle-income families.
Bottom Line
Regardless of the big promises, the bill doesn’t actually get rid of taxes on Social Security. It presents the elderly population with a temporary relief, but the benefits are limited and won’t be for ever. And in the meantime the White House is calling it a big win, the bigger picture, including the costs and long-term impact, tells a more difficult story.