After Donald Trump’s triumph in the presidential election, it’s time to examine the policies that helped him win. A recent study from Monmouth University found that eliminating Social Security taxes was a popular option among the people.
He recommended eliminating income taxes on tips and overtime payments, which all effect the same organization: the Social Security Administration (SSA).
A December 5-10 Monmouth University poll of 1,006 respondents revealed that 66% support eliminating income taxes on Social Security benefits, tips, and overtime, while 21% reject the notion. In an October ABC News/Ipsos poll, 85% of respondents endorsed this idea, making it the most popular economic policy of the 2024 presidential campaign, with 55% strongly supporting it.
According to Patrick Murray, director of the Monmouth University Polling Institute, Republicans are more enthusiastic about a second term for Trump than they were the first time. They are especially looking forward to him carrying out the plans he promised.
However, this may not be the best option as it may have unforeseen repercussions that hamper the effectiveness of Social Security in both the short and long term.
Taxes on Social Security benefits
Contrary to popular belief, Social Security benefits are not subject to federal or state taxes. This policy will not affect those who rely solely on them and have no other sources of income, which makes up a significant portion of the American population.
Taxation is based on “combined income,” which is derived by adding adjusted gross income, nontaxable interest, and half of Social Security payments. Even then, there are several thresholds that determine how much of your combined income (if any) is taxed.
According to the SSA:
The Internal Revenue Service (IRS) requires you to pay taxes on your Social Security benefits:
- 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 laws were implemented, only around 10% of beneficiaries were supposed to be taxed on their total income, but nearly 50 years later, the thresholds have not been revised for inflation, bringing the number of beneficiaries who must pay taxes closer to 40% of all beneficiaries.
Implementing these regulations would be terrible for both beneficiaries and the SSA. According to the Tax Foundation, these measures would cut tax revenue by $1.4 trillion from 2025 to 2034. Additionally, they would “likely accelerate” the insolvency of the Social Security trust funds, which are expected to deplete in 2034. The proposal would result in a 0.9% average rise in after-tax income for all income levels.
